John Pattullo, Co-Head of Strategic Fixed Income, believes that over the last month corporate bond spreads have gone from scary cheap to just ‘kind of cheap’ now. As the dust settles in the markets, he remains optimistic that there are opportunities to be had going forwards.

 Key takeaways:

  • Both investment grade and high yield bond spreads have climbed down from their extreme levels just over a month ago. While they were at scarily cheap levels then, they are now perhaps ‘just cheap’.
  • The impressive support from the US and UK governments, helping to create bridge-financing for businesses and individuals, has brought some stabilisation to the markets. In particular, the US Federal Reserve (Fed)’s efforts have been very encouraging for investment grade and high yield corporate bonds.
  • Last week saw inflows back into the equity and bond funds. There were many refinancings — rescue finance in effect — in the US high yield markets by well-known entities. We believe that good businesses will continue to attract capital, while those in structural decline will find it much harder.


The indices whose yield and spreads were mentioned by John Pattullo are ICE Bank of America US investment grade and high yield bond indices, on the day of recording, 22 April 2020.

Past performance is not a guide to future performance.