High quality corporate bonds offer Australian investors historically high yields in the short to medium term, despite an anticipated surge in government debt issuance, according to Aberdeen Asset Management.
The fixed income manager says “opportunities abound for savvy investors” with corporate yields at historically high levels, despite a surge in new government debt issuance to $5 trillion by 2010.
At the same time, it predicts a rise in corporate debt issuance, which has been virtually non-existence over the past 18 months, citing recent raisings by Tabcorp and Gandel as examples of a “renewed upswing”.
Portfolio manager Nick Bishop said corporate bonds currently offer a yield premium of an average 2.5 per cent over and above government debt, as well as greater diversification benefits.
However, he warned that yields are likely to fall as “global markets realise a V-shaped recovery in growth is highly unlikely and that interest rates will be maintained at low levels by central banks well into 2010”.
