Hunt for Exotic Yields Is Dangerous

Low yields on investment-grade and even many junk bonds are driving investors toward increasingly creative instruments, the risk of which is easy to misjudge.
Low interest rates are disguising the fragility of Europe's recovery. Photographer: Getty Images

Feel happy for Portugal, which just raised 750 million euros ($1 billion) with a bond yielding just 3.57 percent, despite still being in an international bailout caused by a near-bankruptcy. And pop some champagne for French cable operator Numericable, which recently issued $21 billion (no, not a typo) worth of junk bonds of various durations, yielding from 4.875 percent to 6.25 percent - the order book was subscribed for more than $100 billion.

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