Risk but Also Rewards in Corporate Bonds: Pro
High-yield corporate bonds in Europe offer some good value investment, Patrick Legland, Societe Generale’s global head of research, told CNBC.
Speaking on “Worldwide Exchange” he explained he had an “overweight” outlook for the bonds despite the risk involved.
“The rationale is that even if the economic crisis is coming, the state of European or international companies is very good, with balance sheets that remain quite healthy,” Legland said. “Even if the economy slowdown wasn’t expected, the risk of default remains relatively limited and we find some good value in high yield.”
In a separate research note Societe Generale highlighted that corporate bonds had an excellent risk/reward ratio and that investors should have a high exposure to them. Legland continued by explaining that liquidity was a hurdle that should be overcome.
“We need to go to the energy market or the U.S. to find liquidity, if you want to make big trades on this asset class," he said.
While he was “overweight” with Europe and the U.S., he had a different approach when investing in emerging markets. He saw these as areas having to face short term financial pain and warned of a property bubble.
“They have been boosted by negative real interest rates over the last ten years and this bubble will have to burst before getting any better,” he said, but underlined his point that he still had a positive outlook in general for emerging markets.