Alarms Sound on Headlong Rush Into Fringes of Emerging Junk
- SocGen, BofA, Hermes predict harder times for riskier bonds
- Sub-investment grade defaults reach highest in six years
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Investors scooping up the riskiest emerging-nation corporate bonds in an indiscriminate rush for yield are facing a growing clamor of warnings.
While a 13.6 percent return this quarter on company debt rated eight levels below investment grade rewarded those who pushed into the fringes of the debt market, sub-investment grade defaults have reached a six-year high. Societe Generale SA and Bank of America Corp. are predicting a correction and on Thursday Hermes Investment Management said it’s time to "increase vigilance and move up in quality," echoing BlackRock Inc.’s earlier call to be more selective.