BONDS: More robust corporate environment is supportive of the credit market

The near-term outlook for sterling credit continues to look positive, encouraged by an increasingly robust corporate sector, a slowly improving economy, and a favourable market environment.

However, following stellar total returns in 2009, this year is all about focusing on what credit does best – generating attractive income. At a structural level, corporate bonds have assumed a more critical function. With many banks no longer able, or willing, to be tapped for funding, companies are increasingly turning to bond markets to re-finance their operations and fund expansion. Encouragingly, companies are adjusting well to lower post-crisis demand, yet with limited impact on earnings. Assisted by low interest rates, good cashflow management and substantial de-leveraging, a mo...