Bonds
Money Managers See Dangers in Credit’s Eerie Calm
- Volatility in default swaps and bond spreads has collapsed
- Some managers have reduced credit risk in yield-focused market
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Price moves in the global credit market are so calm that some money managers are wondering whether a relentless rally in corporate bonds is becoming a red flag.
A handful, including those at Franklin Templeton Investment Management and AXA Investment Managers, are getting more cautious about corporate bonds. With investment-grade spreads at the tightest in almost two decades, they’ve been reducing allocation to the asset class in favor of government bonds and cash, believing that the meager reward isn’t worth the risks.