Back to bonds

As investors try to work out the best time to come back to the credit, Fatima Luis, manager of the F&C Strategic Bond Fund, said that monetary policy and new issuance shows this could be the right time to gain exposure to bonds.

"The question vexing many fixed income investors is whether we are reaching a turning point in the financial crisis and you only know that once it's passed," she said. "However, the back-drop of actions being taken by monetary authorities makes us believe things are starting to improve."

Luis mentioned recent actions by the Fed, like the engineering of a positive outcome for Bear Stearns and the mortgage swaps introduced under the Term Security Lending Facility, as clear signs that the efficient functioning of the financial system is paramount for the authorities.

"In the UK, this week saw the Bank of England's £50bn liquidity injection and also the announcement of RBS's £12bn rights issuance," she said. The RBS move is likely

to be just the first of a string of banks that look towards shareholders to strengthen their balance sheets by issuing fresh equity.

"This is clearly good news for bond holders as it indicates a need to focus on deleveraging balance sheets and on cash generation, " Luis explained. "We are not out the woods yet but in terms of positioning investors to get the best returns, sometimes it is better to be a bit too early than too late."