Credit looking worth the risk

In the current environment of low inflation and lower government bond yields, investors seeking income have been turning to corporate bonds

The healthy economic climate enjoyed over the past decade brought lower inflation and lower government bond yields. The simple solution adopted by investors wanting to maintain the same level of income is to buy corporate bonds. Recent news headlines focusing on Enron, Marconi and Railtrack have highlighted the dangers of concentrating on income and ignoring the capital risks associated with corporate bonds. However, if the market reminded us that losing one's shirt is a real possibility, few investors would have been advised to invest 100% of their bond portfolio with one issuer. Ove...