Bond Outlook December 2 2009

The trend towards longer-dated new issues, which we identified a month ago, is accelerating. What does it imply? For once we find ourselves disagreeing with the Financial Times, which interprets the trend as a sign of confidence. We rather think that:

• borrowers are locking in low interest rates faced with the likelihood of yield curve steepening
• lenders are accepting longer maturities only because short-term yields are so low

Our own clients are not following this trend; if anything they are now shortening and we feel that this is the appropriate move as stimulus programmes are gently withdrawn.