Something very odd is happening in the bond markets. At a time when risk aversion is at the forefront of investors’ minds, they are piling into junk bonds in such volumes that they have squeezed yields down by around a third since October 2002.
That means that they are paying to take on risk – a peculiar strategy when they are abandoning the risky equity markets.
Confused? You should be, because one of the strangest aspects of this is that the forces producing this trend are contradictory.
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