MFR review results may boost corporates

Last year, investment grade bonds were hit by both rising yields due to the deterioration in the global interest rate environment and a further widening of credit spreads. Will they underperform again this year? To answer that question, we must ascertain the likely trend in the absolute level of sterling government bond yields, and determine whether credit spreads will narrow or widen. On the issue of the trend in government bond yields, we are moderately optimistic. Firstly, the trend in inflation is likely to remain benign. We believe that inflation will average no more than 2% over th...