The yield pursuit

In a world of low or negative yields from government bonds, we believe investors could consider adding global corporate bond exposure. While investors need income, they’re certainly not getting it from government debt where yields are generally low or negative at the moment.

In contrast, the current spread of corporate debt over government credit is around 1.5% at present. This range is perhaps not as attractive as in 2008 and 2012 but it does still make sense in our view. Spreads in the immediate aftermath of the global financial and European sovereign crises reflected systemic risks. Current spreads may not be as attractive as back then but they are at levels typically associated with recessions and yet we do not see a recession on the horizon.

Meanwhile, investment grade debt has the advantage of offering a comparatively attractive return but without the risk of default and low liquidity associated with high yield debt.

Adam Whiteley – Insight, a BNY Mellon company

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