I've had some personal items to attend to this evening, so I thought that I might post an interesting article from today's Financial Times regarding investor appetites for corporate debt, high yield debt in particular. As I have noted in previous posts, corporate debt security prices have climbed markedly over the past few months in direct contrast with equity values. And as an asset class that often acts as a leading indicator of share prices , the run up is definitely something to keep an eye on in the coming months. To be sure, the Federal Reserves low interest policies are driving investors down the credit quality curve in search of additional yield. The question, however, is whether or not these policies are laying the groundwork for an over leveraged corporate sector that could set off another credit crisis-like event? For now this doesn't look very likely, but should the economic environment worsen and sales begin to drag, the ability to service debt securities could become strained. After reading this piece, I think it's clear to see that there are real concerns about investors' exuberance surrounding these securities in the short term. Enjoy.
Junk Buying Fuels ‘Yield Chasing’ Fears
Until tomorrow.....
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