Tradition breaks down as corporate bonds go in opposition to gilts

Investment grade corporate bonds appear to be the favoured asset class for 2009, due to their attrac...

Investment grade corporate bonds appear to be the favoured asset class for 2009, due to their attractive yields of 7%. Furthermore, the spread between government bond yields and that of investment grade corporate bonds is at a historic high, suggesting better value in the latter. But does the high yield of investment grade bonds (currently 7.1%) properly reflect the current economic risk and is it right to compare corporate bonds, which carry economic risk, with government bonds, which are yielding around 3.4% but where default risk is minimal? Certainly, corporate bonds appear good val...