Corporate bond spreads grind tighter (May 09)

According to the Investment Management Association, the credit crunch has resulted in the sterling corporate bond market becoming characterised by wide spreads, a lack – or even absence of – market-making, and significant price uncertainty. Despite these problems, credit spreads have continued to contract over the past month. This may reflect the impact that quantitative easing (QE) has had on investors’ risk appetite rather than the direct impact of QE itself. After all, less than 1% of the assets that the Bank has bought via its Asset Purchase Facility so far have been corporate bonds.