Credit valuations looking stretched

By Gareth Quantrill, investment director fixed interest, Swip Spreads between sterling corporate...

By Gareth Quantrill, investment director fixed interest, Swip Spreads between sterling corporate bonds and government bonds have narrowed excessively. This is mainly because of continued heavy cashflows into corporate debt, a chase for yield and a lack of new issuance. Indeed, spreads have run ahead of both economic data and the financial performance of the issuers. The economic situation is still mixed, stock-specific risk remains high and valuations are, therefore, vulnerable to disappointing economic news or further defaults. Supply of sterling corporate bonds has picked ...