The smarter way to think about bond investments

CORPORATE BONDS

Tony Adams, head of global fixed interest and credit at First State Investments, explains why the addition of tools such as quantitative credit risk measures, are necessary for credit analysts to evaluate risk and return more accurately in the bond market.

The last few years have seen boom times for corporate credit, with a positive environment for many companies to access the bond markets. This is not always positive for investors however, as these market conditions can attract companies whose fundamental strength does not support their credit rating or market spreads. Credit analysis that is focused primarily on a detailed examination of a company’s balance sheet and forward earnings projections, is akin to a driver focusing only on the road straight ahead. Analysts need to be aware of what is going on up ahead, to the sides, and in t...