Following on from the blog’s note yesterday, an investment banker reader passed on a similar insight from the high yield sector of the bond market.
Currently, retail investors are desperate for income-producing assets, with global interest rates very low by recent historical standards. So to help supply meet demand, her bank’s high yield bond team are working night and day to package high yield bonds for sale to the retail sector.
As with Dalian, these investors never look beyond the promised level of yield. Why bother with the boring stuff that might help you decide whether the company could actually afford to pay the interest being offered?
However, she did offer one clue about the underlying quality of these bonds. Apparently the bank is not proposing to keep a share of these ‘red hot’ deals on its own trading book. Blog readers might also like to take a careful look before investing their hard-earned cash.
Helping you navigate the new normal