Bonds
Big-Money Funds Are Betting Against Credit While ETF Shorts Build
- Loomis, Legal & General think credit looks expensive
- Spreads look narrow given tighter money supply, investors say
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Money managers including Loomis Sayles and Legal & General think US corporate bonds look so expensive that they’re cutting back on their holdings and in some cases even betting against the market.
Risk premiums, or spreads, on US investment-grade corporate bonds were just 1.24 percentage point as of Friday. That’s in line with the average of the last decade, but there’s a key difference now: an era of easy money has turned into a period of tight money. Financing costs are at their highest levels since the financial crisis, and corporate bankruptcies have climbed by about 40% this year.