Why the Brexit volatility is worth it

Opportunities in sterling bonds

Where does one find value in a world of compressed risk premiums across the credit universe? This generally requires looking at sectors and regions that are currently out of favour with investors.

As the future is uncertain, we tend to allocate capital to regions or sectors of the market that offer value under different economic and credit paths, not just one point estimate.  One sector that appears to offer value under both a bullish and bearish default and recovery scenario is sterling high yield. In fact, looking out over those various paths, sterling appears to dominate both dollar and euro high yield. This observation naturally leads to the next question investors should ask: why does this region offer value? Well, Brexit, of course - even though the UK appears to be...