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Fixed Income
Fundamental research edge: Bottom-up opportunities in IG credit
Haran Karunakaran
Investment Director
Flavio Carpenzano
Investment Director
Peter Becker
Investment Director
April 12, 2024
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The current high level of yield available in investment grade (IG) corporate bonds provides an unprecedented opportunity to lock in attractive income and returns for years to come.


As the following chart highlights, despite the strong rally in late 2023 (which led to one of the best years of results for the sector since the global financial crisis), yields have only returned to the level they were at the start of 2023 − higher than for 85% of the past decade. In other words, IG corporate bonds have returned to their traditional role as a high-income and high-quality asset class. 


Global IG corporates look attractive on a yield basis

Global IG corporates look attractive on a yield basis

Past results are not a guarantee of future results.
Index is the Bloomberg Global Aggregate Corporate Total Return Index unhedged USD. Data as at 29 Feb 2024. Source: Bloomberg

With policy rates looking to have peaked and central banks likely to cut rates, IG credit is well placed to capture the opportunities created by a decisive shift in the macroeconomic environment.


In recent months, credit spreads have tightened, and as a result, index valuations are now rich versus historical levels. However, a combination of steady/declining supply and increased demand should continue to support the IG market.


Additionally, elevated dispersion at a geographic, sector and individual bond level means this remains an opportunity-rich environment for bottom-up active managers. By shifting focus from the macro to the idiosyncratic, we believe investors can maximise the unprecedented opportunities still available within IG credit.


Haran Karunakaran is a fixed income investment director at Capital Group. He has 19 years of industry experience and has been with Capital Group for three years. Prior to joining Capital, Haran worked as a senior vice president and fixed income strategist at PIMCO. He holds an MBA from London Business School and a bachelor's degree in commerce, majoring in finance and economics, from University of Sydney. He also holds the Chartered Financial Analyst® designation. Haran is based in Sydney.

Flavio Carpenzano is an investment director at Capital Group. He has 18 years of industry experience and has been with Capital Group for two years. He holds a master's degree in finance and economics from Università Bocconi. Flavio is based in London. 

Peter Becker is an investment director at Capital Group. He has 27 years of industry experience and has been with Capital Group for five years. Prior to joining Capital, Peter was a managing director in the fixed income product management team at Wellington Management. Before that, he was a portfolio manager at Aberdeen Asset Management. He holds a master's degree from The Ingolstadt School of Management. He also holds the Chartered Financial Analyst® designation. Peter is based in London.

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