Corporate bonds: Out of whack with market risks

S&P’s study says bonds are overpriced; Study suggests premiums should rise

For corporate bonds, 2009 might have been the party, but 2010 is the hangover. According to Standard & Poor’s, investors in US corporate bonds are taking on too much risk relative to the premiums they earn, which are far in excess of the levels they took before the financial crisis. The market, credit and risk strategies group (MCRS) at S&P has developed a new model to measure the risk-to-price, or credit risk-adjusted yield of each corporate bond in the S&P Composite 1500 Index, which helps determine whether investors are being compensated through yield, the market and credit risk they’re assuming.

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