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Hi all,
I came across a study showing that central banks (mostly) switched big time from investments in TSY to investment in Corporated USD debt since a few years, in search for higher yields. This was seen as a secondary reason driving corporate spreads down.
Since Moodys reports today that junk bonds not only marked a 26-year spread low, but also record proportions (http://www.minyanville.com/articles/index.php?a=12224) in the bond universe (20% vs. 3% in 1980 in lowest bracket / 35% vs. 80% in highest non-investment grade bracket). These numbers look somewhat similar across the whole rating scale as i recall.
I would like to ask if anyone thinks the central banks behaviour could have ramifications for the bigger picture of the debt cycle. I would be inclined to say no, since the volume is still probably relatively small and i believe central banks dont invest in non-investment grades, but might their current action spell any future trouble ?
Thanks for any ideas,
JS
I came across a study showing that central banks (mostly) switched big time from investments in TSY to investment in Corporated USD debt since a few years, in search for higher yields. This was seen as a secondary reason driving corporate spreads down.
Since Moodys reports today that junk bonds not only marked a 26-year spread low, but also record proportions (http://www.minyanville.com/articles/index.php?a=12224) in the bond universe (20% vs. 3% in 1980 in lowest bracket / 35% vs. 80% in highest non-investment grade bracket). These numbers look somewhat similar across the whole rating scale as i recall.
I would like to ask if anyone thinks the central banks behaviour could have ramifications for the bigger picture of the debt cycle. I would be inclined to say no, since the volume is still probably relatively small and i believe central banks dont invest in non-investment grades, but might their current action spell any future trouble ?
Thanks for any ideas,
JS