Despite fixed income assets being no more than “fairly valued” investors are prioritising the yields available rather than the headline valuations, according to the guests on the latest edition of the FT Adviser podcast.
Iain Stealey, international chief investment officer for fixed income at JP Morgan Asset Management, said spreads (that is the extra yield one gets for taking additional credit risk) were tight right now by historical standards, but yields were very high.
"Investors have been wrestling with this and at the moment investors are leaning in to yield, the opportunity to pick up a yield of 6 or 7 per cent is attractive right now," he said.
Tom Hibbert, multi-asset strategist at Canaccord Genuity Wealth Management, is among investors who are keen on taking extra credit risk right now.
He said: “We are wary of putting all our eggs in one basket, for example with government bonds or with going long duration.
"We are cautious on duration, and we think that while bonds are fairly valued, we have been buying credit assets."
David Coombs, head of multi-asset funds at Rathbones Investment Management, is keen on government bonds, having his largest exposure to the asset class for many years.
He said the yields on government bonds were particularly attractive in the current climate, but also that he feels if interest rates remain higher for longer there is an increased probability of recession, and in that scenario he would expect government bond prices to rise and the asset class to revert to its previous role as being inversely correlated with equities.
You can listen to the podcast by clicking on the link above.
