Woolnough: Credit remains cheap despite rally

M&G's Richard Woolnough says corporate bonds remain cheap despite the recent rally, with investment grade spreads now at ‘typical' recession levels.

Woolnough, manager of the £4bn M&G Corporate Bond fund, says while credit no longer represents the once in a lifetime opportunity it did earlier this year, investment grade bonds still represent good value. M&G says BBB-rated industrials are now yielding 278 basis points more than government bonds, down from a high of over 500bps in March this year. By comparison spreads peaked at 275bps in 2002 following the tech bubble bust. "While the economic environment is still problematic, many issuers have been responding in ways that are positive for bondholders," Woolnough says. "Companie...