Last year proved a tough year for investment grade corporate bonds, with credit spreads moving wider. Fast forward six months to today and the decision of the UK referendum to leave the EU is continuing to shake markets, with European credit spreads now even further elevated. It is nevertheless important to recognise that these bouts of volatility can however present buying opportunities as corporate bonds become more attractively valued. Many non-financial European corporate bonds in particular look set to be well supported going forwards, given the ECB’s early June commencement of corporate bond purchases as part of their QE programme.
Despite the headwinds faced by the UK as it works to disentangle itself from the EU over the next couple of years, a glimpse back at the last twenty years demonstrates how the UK corporate bond market has evolved to present an interesting investment environment today.
In this edition of the M&G Panoramic Outlook, Richard Woolnough – fund manager of the M&G Optimal Income Fund, M&G Strategic Corporate Bond Fund and M&G Corporate Bond Fund – explains how the UK corporate bond market has diversified sufficiently over time in order to challenge the traditionally simplistic view of fixed income investing. Richard compares the UK with the US, Europe and equity markets, exploring the range of opportunities that the UK corporate bond market has to offer global investors.