Euro High-Yield Looks Frothy

Ten years ago this week, BNP Paribas suspended redemptions from three hedge funds and effectively ushered in the credit crisis. The intervening decade has seen central banks pump trillions of dollars, euros, pounds and yen into financial markets in an effort to keep the global economy afloat. As a consequence, investors have found themselves chasing yields lower.

Spreads on high-yield debt denominated in euros have just marched below what investors charge the U.S. government to borrow for a decade. And while this may seem like comparing apples and pears, both are effectively measures of appetite for risk -- and boy, are investors taking a risk.