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European Sovereign Sebt Fears Showing Limited Impact on European Corporate Bond Markets

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"Strong earnings results, low inflation expectations and a view that the ECB will have to keep interest rates lower for longer to support the economic recovery has seen demand for European corporate bonds remain fairly robust," writes Stefan Isaacs on the Bond Vigilantes blog. "Interestingly, the once strong correlation between sovereign debt concerns and corporate bond markets appears to have now broken down. The Itraxx European index, a measure of creditworthiness of European investment grade credit, has tightened from September 2009. This is in contrast to countries that are located geographically on the periphery of Europe, where CDS spreads have had a tight correlation with Greek CDS."