Forced seller action leaves corporate debt mispriced

ONE TO WATCH

Royal London's Paola Binns has built up 20% overweight in asset-backed securities.

In the middle of the credit crisis, corporate debt plunged to levels unseen since the Wall Street Crash of 1929, with yields hitting 9% due to extensive selling pressure. A number of investment grade companies were offering coupons to compensate against the risk of a default, as they attempted to raise capital to refinance. “We felt, and still feel, that in volatile markets corporate debt becomes hugely mispriced, with investment grade coupons reaching record levels of 9% in 2009, as high as they were back in the 1930s,” said Paola Binns, manager of the £273m Royal London Sterling Cre...