Capital Ideas^TM

The prospect the US Federal Reserve will soon pivot toward easing policy has seen credit markets rally strongly over recent months. As a result, credit spreads for investment grade corporate bonds have continued to tighten from the peaks reached after central banks commenced their hiking cycles.

Spreads for the global investment grade credit indices are now near historically tight levels. Importantly, this does not mean that there are no longer opportunities to be found in IG credit. Indeed, this remains a very favourable environment for the asset class both in terms of carry and the potential duration tailwind from falling rates.

This note outlines 5 reasons why we think investment grade credit remains an attractive area of the bond market including: tight spreads do not always immediately lead to wide spreads, yields remain high, ongoing dispersion, strong fundamentals, and supportive technicals.