Appetite for corporate bonds still strong

US sub-prime mortgage problems have been in focus for some time, but for corporate bonds this is only part of the story - despite the drying-up of liquidity, credit fundamentals remain strong. Banks developed mechanisms to remove existing loans from balance sheets and free up capital for making new loans - and more profits. Over time, a gap developed between the original lenders and those who now "own" the loans. As defaults have started to rise on some loans, investors became unwilling to lend to vehicles containing these assets, and bank business models broke down. Being unable to reduc...