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Home > Investments > Fixed Income

By Simoney Girard | Published Apr 25, 2012

Strong long-term results lie with corporate bonds

Mr Robinson, who also manages the £32.15mF&C Corporate Bond fund, said: “There is still a positive outlook for corporate bonds over medium term.

“Healthy corporate balance sheets and attractive credit spreads suggest the outlook for corporate bonds over the medium- to long-term remains positive from both a fundamental and valuation perspective.”

He said even the most challenged sector of the market – banks – continues to focus on reducing its leverage.

However, in the shorter term, Mr Robinson said he was more cautious, adding: “The technical factors and positive economic surprises that have driven the market rally this year are diminishing.

“The market remains a nervous place with the volatility often having more to do with the anguish of deleveraging and the tail risks associated with the eurozone than the underlying credit quality.

“Fortunately, the rally in the UK corporate bond market has been more constrained than elsewhere providing sterling investors with more of a buffer if events do take a turn for the worse.”

Gavin Haynes, managing director for Bristol-based Whitechurch Securities, said: “We would concur - across the fixed interest world we see that corporates is where the value lies.

“For much of last year, there was so much risk aversion from investors and they fled to government bonds, which created an anomaly with extremely wide spreads between government bonds and corporates.

“Although there has been a narrowing of the spread since, we still think investors are getting rewarded for taking credit risk along the credit scale.

“There is a lot of well-financed, multi-national corporates that are paying better yeilds than governments and some high-yield bonds are offering a good return that justifies the lack of a cushion.”

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