SLI's Curran: Avoiding the corporate bond 'red herrings'

Jon Curran, senior vice president credit at Standard Life Investments, explains why with a corporate leverage risk looming, picking the right bonds has become paramount in today's low yield environment

The US investment grade corporate market has grown larger and increasingly diversified over time, with the expansion seen most in more BBB-rated issuers. Today, there are nearly 5,700 bonds that comprise the Barclays US Corporate index with a market value over $4.7trn. BBB-rated bonds make up 48% of the market, with just 11% rated AA or higher. Compare that to just five years ago when the market contained just 3,800 bonds with a market value of $3trn - 36% less than its value today. Also, five years ago the index skewed higher quality, with 38% of the market rated BBB and 18% rated AA...