In a fixed income investment note, the asset management firm named the high yield sector as its favourite as default rates remain low and credit spreads have further to narrow. JP Morgan singled out European high yield, which has lagged behind the US.

The company also said that emerging market debt is cheap, especially the higher yielders in Latin America and Eastern Europe.

The advantage in investment grade corporates, however, specifically banks and finance, is rapidly disappearing, JP Morgan said.

In terms of currencies, the asset manager thinks that the recovery in the US means that investors should prefer the US dollar to the euro and the Japanese yen.

JP Morgan said that its indicators suggest US growth of around 3 per cent this year and that developed markets will avoid a recession.

“Likewise, the eurozone looks, at least in the short run, a lot more stable,” said Nick Gartside, international chief investment officer for fixed income at JP Morgan Asset Management. “Longer term the LTRO could well have interesting side effects. Like any drug, it has had a very powerful short term impact, but longer term, as with any drug, there could well be significant and unforeseen side effects."

Gartside said that policy error remains the greatest downside risk in the next quarter, and that over-regulation of financial services could choke off the much needed extension of credit.