Credit could become expensive due to macro and political risks

ON BONDS

M&G's Stefan Isaacs explains why bottom-up bond selection will become even more important for high-yield investors in the months ahead.

Against today's backdrop of high headline inflation readings, rising oil and commodity prices and geopolitical and sovereign debt concerns, some uncertainty about the outlook for high-yield bonds is understandable. What is more, the asset class has undergone a period of strong performance. Taking into account the sharp rise in risk aversion in Q1 of this year amid unrest in the Middle East and tragedy in Japan, high-yield bonds held up well compared with investment grade and government bonds, which came under pressure because of inflation and possible rate hikes. On those occasions when ...