After Bond Rout, Spread Risk in Focus

Liquidity is tightening in China’s money market, but the search for yield is still on.  Bond investors have increased exposure to high-yielding corporate bonds, sending corporate spreads lower but increasing credit risks within portfolios. The same liquidity pressure causing government bonds to sell off presently is likely to boost corporate borrowing costs as well, particularly in an environment of rising investor redemptions from non-bank financial institutions.

Posted October 31, 2017
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