7IM's Scott swaps corporate debt for Spanish and Italian bonds

7IM's Alex Scott has begun switching out of corporate debt in favour of Spanish and Italian bonds on a large proportion of the group's funds, ahead of any rise in government bond yields.

The portfolio manager said the funds have been overweight high yield and investment grade debt for some time and returns have held up this year, due to low default levels and falls in government bond yields. However, the team has been switching allocations from corporate bonds. "While valuations of corporate bonds are still relatively attractive against highly-rated government bonds, yields are now low in absolute terms. For example, below 3% for an index of investment grade USD corporate bonds. "At the same time, corporate bond index investments are relatively long-dated so they w...