Investors switch to govt as corporate bonds reel

After months of relative calm, volatility has returned to financial markets. The headlines have been about falls in Chinese equities, problems in the US sub-prime mortgage market and threats to US economic growth but increasing risk aversion among investors and the flight to quality has also been felt in the bond markets and in particular among more speculative grade bonds. Generally, the lower the rating and the more junior a bond is within a company's capital structure, the stronger the correlation of its price movements with movements in equity markets. This was in evidence during the ...