Security selection more important than ever as lack of liquidity in credit markets begins to bites

While developed market government yields may be at near record lows, volatility is not. We feel there is little compensation for that volatility - last summer's back-up in yields being a good example of the risk of playing the 'low for longer' game.

However, while yields may be low, credit spreads are not. There are significant opportunities in some areas of the credit market following the recent sell-off in risk assets. We would highlight in particular longer-dated US bonds, which are currently priced at levels usually only seen in severe recessions, despite the fact the US economy has not actually entered a recession. US spreads have reached these levels partly as a result of widening in sympathy with the US high yield market, which towards the end of 2015 suffered from large outflows and low liquidity, leading to a number of f...