While the UK government’s use of quantitative easing, or printing new money, carries major inflationary threats, the outlook for financial bonds is better than ever, says UK investment management house Artemis.

Injecting fresh money into the economy wil cut borrowing costs, says James Foster, fund manager of the Artemis Strategic Bond Fund, but he warns that using this "nuclear button" method to re-inflate the market carries the risk of significant inflationary pressure later on.

“Not only can you overstep the mark and bring too much money into the system, the excess money will dilute the UK currency, weakening it and leading to rising inflation,” Mr Foster said.   

Mr Foster is taking a positive view of corporate bonds, as they have already priced in significant risk, but he argues that financial bonds are even more attractive.

“The outlook is even better for financial bonds which have already priced extreme risk i.e. that more than 50 per cent of banks will go bust in the next five years.  Given the government’s handling of the banking sector so far, this is a very unlikely scenario,” he said.