One of the deliberate implications of central banks flooring borrowing rates right out the yield curve via bond buying and quantitative easing is that it forces private investors to seek yield in riskier assets by lending to the corporate sector and ultimately the riskier part of it that may otherwise struggle to get affordable funding. With the Fed last month, possibly ECB this week, signalling a strategic shift to keep interest rates down here for years to come, investors are responding. The world's biggest asset manager BlackRock said on Tuesday that it was moving to overweight allocations of global high-yield, or junk, bonds - arguing implied default rates were too high given government supports and the speed of the economic rebound - while reducing its position on investment grade corporate bonds to neutral. The shift out the risk curve is going to plan.
Chart by Ritvik Carvalho and commentary by Mike Dolan.
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