High yield bonds set to better investment grade

markets forum

Stephen Snowden, manager of the Old Mutual Corporate Bond fund, admits high yield bonds will outperf...

Stephen Snowden, manager of the Old Mutual Corporate Bond fund, admits high yield bonds will outperform investment grade over the next 12 to 18 months. Credit spreads have tightened considerably relative to the past five years, Snowden said, and, as result, corporate bonds look expensive. Gilt issuance is also expected to increase, which will negatively impact the sector, he noted. Added to this, high yield bond default rates have been dropping sharply over the past few years and are expected to continue to fall going forward, lending more weight to his opinion that they will outperform. ...