EUROPE - European credit will outperform cash and government bonds in 2009, fund managers claim.
He said: "Spreads offered on the various European and UK credit indices now look much healthier. Investment grade bond spreads are 400bps+ while high yield bond spreads are now over 2000bps.
"This offers much more comfort than the paltry spreads on offer in mid-2007 - at that time investment grade spreads were less than 100bps and high yield spreads were less than 250bps."
Cordery added, as the year progresses, investors would be attracted to credit as cash interest rates fall relative to the yields offered on corporate bonds and as it becomes clearer which companies would survive recession and which companies would not.
In its latest Investment Global outlook, Standard Life pointed out investment opportunities undoubtedly existed within investment grade credit, but it warned careful stock selection was paramount.
Within their corporate bond portfolios, Standard Life said it maintained their preference for investment grade credit over high yield debt.
It said it remained unconvinced the twin causes of the extreme weakness seen so far -forced selling and increasing concerns around defaults - had played themselves out.
In addition, according to Standard Life high yield bonds are unlikely to benefit as immediately as investment grade bonds from further reductions in interest rates.
However, it warned the downturn in corporate cash flows would lead to higher corporate bond defaults, so individual issues required careful examination.
Meanwhile, a survey by Standard & Poor's Fund Services showed fund managers hoped bond market liquidity would improve in 2009 but did not expect it to return to 2006 levels for many years.
S&P's Fund Services lead analyst Kate Hollis said: "Managers became more bearish on the economy as our review process progressed.
"However, most believe that investment grade credit is cheap and the forced selling is broadly finished - unless there are more investor outflows. Still, all accepted there would probably be considerable new issuance, especially from financial names, in 2009."
The Pensions Regulator (TPR) has set out plans to use "new regulatory initiatives" with over 1,000 schemes as it aims to tighten its regulatory grip and boost member outcomes.
HM Revenue and Customs (HMRC) has announced it is delaying the provision of data that will enable pension schemes to confirm the guaranteed minimum pension (GMP) benefits to pay to members until the end of the year.
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