The bond supremacy

The crash has led to a new boom in corporate bonds. When Tesco’s debt yields more than its shares, every little helps

When the Bank of England began its £200 billion programme of quantitative easing — ‘QE’, its technical name for printing money — at the height of the credit crisis in March last year, it made two important discoveries.

The initial plan of the Bank’s markets director, Paul Fisher, was to use the money to buy up bonds issued by major companies. This, it was hoped, would put cash into company balance sheets and help prevent the crisis cascading though the rest of the economy. But the Bank quickly learned that, apart from a few blue-chip companies, the market in UK corporate bonds was virtually nonexistent. American companies have long been users of the bond markets, but the British have preferred to raise their new capital by creating and selling new shares.