Meeting in the middle
The equity and corporate bonds markets are more in step than ever before, prompting investment banks to merge equity and debt resources. Lisa Cooper asks whether thephenomenon is just a short-term cyclical shift or a more profound structural adjustment.
On July 22, the Dow Jones ended the day below 8,000 for the first time since October 1998. On the same day, the spread between US corporate bonds and Treasuries widened noticeably.
The following day, as the Dow fell further, spreads widened again. A correlation between the equity and credit markets has been growing stronger on both sides of the Atlantic throughout 2002. And similar comparisons can be made with European and UK equity indices and the relevant corporate bond spreads
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