The correlation between the equity and corporate bond markets has broken down, and will encourage companies to increase funding from the bond markets while decreasing their reliance on equity, according to Schroder Salomon Smith Barney.

The bank's European Portfolio Strategist report said that the latest collapse in equity prices has not been accompanied by a fall in higher-yield corporate bonds. Since the beginning of December the Dow Jones Stoxx Index has fallen 17% while the EMU BBB seven- to 10-year corporate bond index has risen 2%.