Here’s why, for now, you should stay clear of corporate bonds

News Snapshot:

The yield advantage of investment-grade and high-yield corporate bonds over government issues is now historically low relative to the past 25 years. That may seem rather puzzling given where we are in the economic cycle. Leading indicators and the inverted yield curve – when short-term bonds yield more than long-term ones – are signalling an economic downturn ahead. Often, that would mean corporate bonds would have to offer larger payouts relative to safer government bonds to offset the risk that companies’ earnings could come under pressure and defaults might rise. But we haven’t seen this so far, despite economic storm...