Corporate Bonds at Risk of Crash on Abrupt Downgrades, BIS Says

Surging supply of corporate debt in the riskiest investment-grade category leave markets vulnerable to a rout if economic weakness triggers bouts of rating downgrades, according to the Bank for International Settlements.

Investment-grade bonds classed BBB by ratings firms -- one step above junk status -- have proved popular with funds bound by their own rules to hold only low-risk securities. While central banks pursued cheap money policies in the years after the financial crisis, such bonds offered tempting yields while still falling into the low-risk category that made them eligible holdings.