Spread widens on quality components

Spreads on investment grade sterling corporate bonds have been widening since March 1997. During that period the market has increased from £93bn to £165bn by the end of the first quarter of 2000 while the gilt market has grown by only by 3% to £239m. The trend has continued and spreads are now substantially wider than they were at the time of the Russian crisis and hedge fund problems in late 1998. Recent studies have shown a strong correlation between corporate spread widening and growth in corporate issuance, and a similarly strong correlation between shrinking government supply and wi...