The worst of the credit crisis is not behind us, warns Willem Sels, head of credit strategy at Dresdner Kleinwort.

He says that while liquidity tensions are easing, the market is entering a second phase of the crisis. Real credit losses are accelerating and many areas of the market have yet to see the worst of the crunch. He says corporate defaults have only just started rising and he expects high yield defaults to accelerate sharply to 7-11% by mid-2009, particularly in the US.