However, certain areas of the market still offer good value, according to industry experts interviewed by FE Trustnet.
Kevin Doran, senior fund manager at private bank Brown Shipley
"For us, there are two areas of fixed interest where we see opportunities," said Doran, who heads up the IFDS Brown Shipley Sterling Bond portfolio.
"The first is in high quality bonds domiciled in [peripheral countries], and the second is permanent interest bearing shares (PIBS)."
"We see bonds in the first category as 'sheep in PIIGS' blankets'. This basically means that we believe they do not get as much exposure as they should because they are domiciled in the wrong country and people ignore them."
"The ‘sheep in PIIGS' blankets’ phrase come from the fact these companies are perfectly sound global organisations that are located in the PIIGS [Portugal, Italy, Ireland, Greece and Spain]."
"Take Telefonica for example – most of the company’s profits come from South America but investors avoid it because it is domiciled in Madrid. The company is delivering good yields for investors and as their profits are up they are using the proceeds to pay down their debt."
Doran also likes PIBS – non-redeemable high-yielding bond securities issued by the major UK building societies and traded on the London Stock Exchange.
He commented: "Under the Basel III regulations that come into play next year building societies will have to increase their level of tier-one capital, however PIBS will no longer qualify for this, so building societies have a regulatory incentive to ‘call’ them – buy them back."
"Even if they choose not to, once the call date is passed, building societies have to rebase the interest coupon every three months in line with current rates, so effectively the PIBS become floating rate notes, which will be an attractive proposition when rates begin to rise."
Robin Hepworth, manager of the Ecclesiastical Higher Income fund
The FE Alpha Manager likes preference shares – an equity security with properties of both an equity and a debt instrument.
"Corporate bonds make up 38 per cent of our portfolio, if you include preference shares," he said.
"Preference shares are fixed interest assets but some do break down into equities and tend to have a higher yield. We particularly like preference shares in insurance companies, like Aviva."
"Corporate bonds have had a very good run recently with a 'triple B' rating and are yielding between 4.5 per cent and 5.5 per cent year to date. However, my view is that they have possibly run their course and so I am now selling out and moving into more preference shares."
"One of our high yielding preference shares is GDF Suez which is a European utility company. It has a very solid and long track record and is currently yielding 8 per cent."
Hepworth says many of the highest-profile funds do not tend to hold this type of product, which puts them at a disadvantage.
He commented: "One of the reasons why preference shares are overlooked as a fixed interest asset is because it is a relatively small market, as there are only around 250 million shares issued, which is fairly small."
"This means that the larger fund houses ignore them because the liquidity is not right and they cannot move into them easily; whereas at Ecclesiastical, as we are a smaller firm, we can gain access to them."
Alex Claringbull, senior portfolio manager at BlackRock iShares
Claringbull has seen a number of his clients move into higher yielding corporate bonds outside of the UK.
"Government bonds with good yields are going to be hard to find for a long while, especially as prices are high while interest rates are low," he said.
"Therefore we need to look further afield, like high yield corporate bonds."
"I think that a lot of our clients have tended to move to global credit markets and global high yield markets because of the current climate of low interest rates and unlimited monetary easing in the West."
"This is not only emerging markets, but other developed markets and companies with a global focus."
"Take Australia for example – unlike its western counterparts it still has interest cycles and non-financial crisis yields. This is also the case for Singapore."
"Also, in the more traditional emerging market sectors we see fairly elevated yield markets and people’s interest has certainly increased."