Is central bank support for corporate bond markets truly unlimited? Our sense is decidedly not.
Hedonic adaptation is a psychology term that describes the human tendency of reverting to a relatively stable or ‘normal’ state following either positive or negative life changes.
The China economic slowdown story had been building behind the scenes long before markets decided to focus on trade hostilities with the US.
During the early stages of the reach for yield process, credit market exposure was the wise choice. Now that we’re closer to the end, it’s more questionable.
Credit spreads over government bonds should compensate investors not just for default risk but also for other risks such as illiquidity. Gopi Karunakaran discusses how corporate bond markets are currently not providing sufficient compensation for growing illiquidity risk.
Moody’s has recently commented that Australia’s “AAA” sovereign rating could be under pressure, notwithstanding the current stable outlook.