Risky Is Now Safe in Bond Market Upset by Soaring Inflation
- Subordinated corporate debt has little interest rate exposure
- Some see the debt as a haven amid long inflation battle
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Junior debt issued by banks is normally one of the riskiest types of fixed-income in the US and Europe. It’s typically not backed by collateral and in the event of a crisis it only gets paid back after other bonds.
But in a world of soaring inflation and interest rates, it has a feature that suddenly makes it safer than just about the very safest of corporate bonds: the debt is usually repaid after a few years.