The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Bond markets: Swimming not drowning

Regulators have been strident, if rather late, in their concern over the risk that short-term retail money now represents in today’s high yield corporate bond market. So when retail funds began to sell off in late July many braced for the worst. But by the end of August it was as if nothing had happened. The bond market’s ability to adapt may be greater than Federal Reserve chair Janet Yellen believes.

swimming-400

The now traditional summer disruption in the bond markets came this year with a long-overdue back up in high yield following vocal regulatory concern over risk in the leveraged finance market. But, unlike last year, despite record retail outflows from the asset class in mid-August, the sell-off seemed like a faint memory by the end of the month. Could the risks to the bond markets of short-term retail money have been overstated?

“We have been in a bull market for credit since 2009,” says Richard Zogheb, co-head of capital markets origination for the Americas at Citi in New York. “We lost 90 days in 2011 and a month or two last year, but otherwise it has been an uninterrupted run. I expect we’ll see a correction at some point.” But as each year passes that correction almost seems further away than ever.

Between late June and late August, $17 billion was withdrawn from US high-yield funds, representing 5% of retail assets under management in the market. The lurching reversal in sentiment came as little surprise as many observers have done little else over the last two years than debate the bubble in high yield.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree