Editor's Letter

As Credit was going to press, the bond market was enjoying a sustained window of new issuance, echoing that of late last year. Throughout the problems besetting our sector the market for new bonds has been subdued or entirely absent for long stretches, before reviving with busy but short-lived periods of activity. The current level of origination is high by any standards, and while many of our contacts don't expect it to survive the publication of fourth-quarter results for last year, it shows that there is a place for new issues from borrowers who need to fund.

Wide spreads are an obvious driver, yet while these are good for investors, as one observer notes in our piece on the European corporate bond market (p. 20), current pricing is either erroneous or indicative of a depression likely to wipe out everything below investment grade. With companies in many industries registering - in brutal fashion - the effects of the downturn, defaults will certainly be a theme for 2009.

Another is regulation. Everything from fair value accounting to Basel II is under discussion across the market, but new rules are likely to be imposed at a much more fundamental level. The banks, of course, have been expecting this for some time, and its potential manifestations are discussed in our profile of the new fixed income team at Evolution Securities. But in the wake of the Madoff affair, it has become much more likely that the regulators will also turn their attention to the buy-side. That particular scandal is, for once, one that the credit market doesn't have to explain, but the investors caught up in it might have benefited from a simple and aged maxim that participants in credit have re-learnt over the last 18 months: if it looks to good to be true, it probably is.

Matthew Attwood.