Euro Junk Bonds vs US Treasuries

Every now and then you see something that makes you sit up. The chart above shows that the yields on European Junk Bonds (these are the riskiest corporate bonds) are the same as US Treasuries which are supposed to be the safest form of investment, indeed the 'risk free' rate on which everything else is judged. There might (rightly) be some questions about how safe US Treasuries really are in the long term - but this chart really shows firstly how desperately investors (pension funds particularly) are chasing yield at any price and how secondly complacent credit markets have become.

It is no coincidence that this year Argentina has sold 100 year bonds at an 8% yield. This is a government that has been shut out of debt markets for the last decade and is a country for which inflation in double digits has been the norm for the last century.

The 'big shorters' must be out in force here....


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