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Investment- grade can match junk bond yields

New Star head of fixed income James Gledhill says investors may well find better bond opportunities in the investment-grade sector rather than through high-yield bonds.

He says high-yield bonds may offer 20 per cent annually for the next three years but the attraction of investment-grade is that while it may return 13 to 15 per cent annually, the coupon could be held for up to 10 years.

He says: “What has happened with Lehman Brothers has shown that governments are unlikely to let another big bank fail again, therefore the attraction for investment-grade bond funds is enormous. It is amazing that their spreads have not jumped on the back of the news as it means that default risk is now low.”


Abbey and Lloyds back on trackers

Abbey, Lloyds TSB and Alliance & Leicester have led the way in bringing back tracker mortgages after last week’s 1.5 per cent cut in bank base rate.


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