Investors' bond appetite remains despite risks

01/11/2010 | Financial Times (tiered subscription model)

The 2009 rally in corporate bonds has continued into this year and shows no signs of abating. The expectation, however, is that the credit rally will eventually stop or possibly reverse. Interest rates, which have been at near zero for more than a year, are widely expected to increase, pushing down the price of fixed-rate bonds. "A natural consequence of the expected rise in rates is that yields would likely rise over 2010 and 2011," analysts at Deutsche Bank said in a report. "The rising yields will hurt credit on a total return basis, particularly investment grade credit."

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