Corporate bonds offer value despite tightening

ON BONDS

Fidelity's Ian Spreadbury says diversification has never been more important for bond investors.

In anticipation of rising interest rates some bond investors have shortened their duration, and offset the subsequent loss in yield by moving down the credit scale. But because higher-yielding issues are more closely correlated to equities there is a downside to this. And although liquidity has returned to bond markets since 2008 and default rates are now approaching historic lows, this has also increased their exposure to credit risk. Admittedly, concerns over rising rates are understandable. Rates have remained at an emergency rate of 0.5% since 2008 while headline inflation has ...