Searching For Yield

Searching For Yield

Jeroen Blokland  | Jun 27, 2019 11:37

The average yield on Eurozone investment grade credits has fallen to just 0.55%. This is mostly because of record-low bond yields on government bonds, but spreads are also pretty tight.

Surely, a new round of quantitative easing, likely to include corporate bonds as well, should have a positive impact on returns. At some point, however, investors will start to question whether these kind of yields are sufficient compensation for the risk they have to bear. The chance of default is never zero and the fact the we have arrived in the latter stages of this economic cycle could heighten their concern.

Also, the very low yield could push investors up the risk curve; for example, by investing in less liquid bonds, which comes with all sorts of additional risk, as we have seen in recent days.

European Credits - Yield To Worst

Jeroen Blokland

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