Investment grade bonds outperform

Spreads have fallen over the past year and compensation for credit risk has therefore reduced. However, we should firstly consider performance against other asset classes. Investment grade bonds have outperformed both gilts and equities. The credit blow-out trend of the previous 18 months has not disappeared but provided investors avoided recent cases such as Ahold, British Energy and Avone Energy, they will have fared well in this environment. So far this year, 10 of the 20 worst performers were BBB-rated compared with 15 of the top 20 performers so stock selection remains key to ...