The sell-off in bond markets this year has driven yields to levels that merit closer attention, says Victoria Whitehead, senior portfolio manager for European investment-grade (IG) credit. Victoria sees eurozone IG credit as attractive on the basis that risk premia are commensurate with much higher default rates than she thinks will actually materialise.
She argues that many issuers with an IG rating will be going into the downturn from a position of strength and therefore a spike in defaults in the segment looks much less likely than for high-yield credit. This should allow credit spreads to tighten. “A lot of bad news is priced in,” she tells Andrew Craig, co-head of the investment insights centre, in this Talking heads podcast.
For Victoria, stubbornly high inflation represents the main risk to the IG segment. At a portfolio level, banks remain her favourite sector pick.
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