Returns now concentrated in carry and relative value, says Barcap

In its latest credit market outlook presentation, Barclays Capital looks at key investment themes over the next quarter. The bank expects higher-beta sectors (such as financials) and ratings groups to outperform. Double-Bs are the one exception in high yield, where they remain cheap to single Bs and should be barbelled with triple-Cs.

Lower volatility and tighter spreads meant that carry and relative value trading will remain important drivers of returns, says co-head of credit strategy Ashish Shah. An example is the return of positive basis trades in high yield, he says.

The report also highlights M&A activity, interest rate dislocation risks, European weakness and policy uncertainty as key themes.