Bond Outlook February 3 2010

When bond markets speak, which at some point they must, their judgement on governments that borrow to sustain deficit spending at levels never before seen in peacetime, is likely to be severe. In fact, the markets are already murmuring by, for example, granting lower spreads to some corporate borrowers than to many governments. Such murmurs are easily overlooked when low-credit bonds are still being issued and taken up at inadequate spreads, albeit at a slower rate.