Confidence returned to credit markets in September,with high-yield bonds in particular recording good gains.Issuance increased,particulary in the US,where some companies had deferred bond sales scheduled for the June-to-August period.Generally,riskier assets generated the month's best returns,with spread sectors such as non-investment grade and emerging market debt performing well.The gains came despite third-quarter reports from Morgan Stanley,Lehman and Bear Stearns showing losses arising from investments in securities linked to US sub-prime mortgages.Over the month,our strategy remained one of holding and overweight exposure to high quality "AAA"-rated debt focused on long-dated issues in order to help manage duration,counter balanced by an exposure to short-dated,higher yielding securities,selected for their potential to produce attractive risk-adjusted yield.The Fund holds no positions in collateralised debt obligations (CDOs),residential mortgage backed securities (RMBS)or other structured credit products with a leveraged exposure to the US sub-prime mortgages market.The Fund is underweight financials.
