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Capital Markets

Bond investors add liquidity to credit risk in desperate search for yield

Investors modelling prices from data across fragmented and illiquid bond markets find that cloud computing brings speed, while AI offers precision.

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With world central banks promising to keep policy rates low even if inflation picks up, further expanding their already swollen balance sheets and extending liquidity through the banking system, the time is ripe for asset bubbles.

The signs are there in bitcoin’s rise past $50,000, the ramp up in GameStop, in Spacs and in already indebted companies being further levered up to pay dividends to their private equity owners.

However, investors have little option but to go down the risk curve to generate income.

February saw the biggest ever European high-yield bond deal, a £2.75 billion two-tranche issue to finance the leveraged buyout of Asda, where investment grade credit investors placed big orders for a BB- paper.

At the start of February, both Tradeweb and MarketAxess reported record average daily volume in corporate credit trading for the month of January.

Are we on the edge of a big sell-off?

The sell-off in treasuries looks orderly for now. But investors are starting to worry about its speed

Actually, it is already under way, but at the opposite end of the rating scale, in supposedly risk-free rates.

Sovereign bond prices are falling fast.

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