Bond Investors Looking to Get Ahead of ECB Turn to Derivatives
- ECB plans to start buying corporate bonds in second quarter
- Investors sell default insurance to get credit exposure
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A rush for credit exposure in Europe is manifesting in the swaps market because investors are struggling to find enough bonds to satisfy their demand.
The European Central Bank’s plan to purchase corporate bonds is fueling demand for securities in anticipation of a rally when the purchases start. Investment-grade bond funds in euros had inflows each week since the ECB said on March 10 that it would expand measures to stimulate the economy. That’s already suppressed yields and made it harder to obtain the notes, making credit derivatives more attractive.