When a triple-B-rated utility company issues a 3-year bond at a negative yield, perhaps it’s time for the credit cycle to call last orders at the bar? Gopi Karunakaran, Portfolio Manager at Ardea Investment Management flags some late-cycle behaviour, and warns of an imminent structural shift.
Gopi compares what is happening in credit markets today to “the kind of behavior you might see toward the end of a big night out, where it seems like a good idea at the time, but the next morning… not so much.“ Credit ‘tourists’ that have pushed into the market in the search for yield, are now retreating as bond yields improve, a dynamic that he warns could be very disruptive.
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