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Corporate bond price is right, says Pattullo

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Henderson head of retail fixed income John Pattullo believes corporate bond funds are now priced attractively despite money coming out of the sector.

Pattullo says the market is discounting a double-dip but says the chances of it happening are low, having only seen two since the 1920s, both of which were down to government policy errors. According to IMA figures, corporate bonds have seen £250m-worth of net retail sales outflows in the first four months of the year, having seen over £6bn of inflows in 2009.

Pattullo says: “We saw a sell-off in May continue into early June and the question is whether this is an honest sell-off or if there is something more sinister but the economic and company newsflow remains strong.

“The market is a bit schizophrenic and credit has sold off but we don’t see defaults rising and the market is still open to refinancing. If markets remain open and the contagion in Europe is not going to spread, it suggests credit is quite cheap again. You do need compensation for the illiquidity concerns.”

Hargreaves Lansdown senior analyst Meera Patel says: “Bonds look attractive again but inves-tors must recognise that they will not get the returns of 2009.”

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. I agree that Bonds are looking attractive and should still be part of everyone’s portfolio. At the moment yields from income funds are compelling, and proberly worth the extra risk.
    No one should expect another 2009, well not in my life time,anyway!

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