• Email Us: [email protected]
  • Contact Us: +1 718 874 1545
  • Skip to main content
  • Skip to primary sidebar

Medical Market Report

  • Home
  • All Reports
  • About Us
  • Contact Us

Euro junk bond yields below inflation for first time

September 3, 2021 by David Barret Leave a Comment

September 3, 2021

By Yoruk Bahceli

(Reuters) – Yields on euro area junk-rated bonds have fallen below the bloc’s inflation rate for the first time, a further sign of the scarcity of assets offering investors any real returns.

The 2.3% yield on the ICE BofA euro high-yield index is now more than 60 basis points below current euro area inflation, which came in at 3% for August on Tuesday.

The move follows a similar drop in U.S. junk bond yields relative to inflation in May and it has turned more negative since.

Junk bonds are the riskiest debt category, including sub-investment grade securities rated BB+ or below.

Real yields — borrowing costs adjusted for inflation — turning negative on such securities was akin to crossing a Rubicon, BofA credit strategists said on Friday.

“If there’s one metric that defines or reflects how much investors need to reach for yield, it is this negative real yield backdrop,” said Barnaby Martin, head of credit strategy at BofA.

“The irony is that even buying high yield debt doesn’t help you beat inflation in Europe at the moment. It really reflects how much the ECB is keeping a lid on fixed income.”

U.S. as well as European inflation is running above target. Though policymakers see the rise as transitory, the concerns it has stoked, alongside uncertainty around the economic outlook, have helped boost demand for inflation-linked bonds, pushing real yields further and further sub-zero.

Euro area real yields, also an indicator of how easy financial conditions are expected to be, fell particularly sharply in July, when the ECB adopted a symmetrical inflation target, meaning it will keep interest rates lower for longer.

Low real yields are boosting equity and credit markets but BofA strategists warned that such trades were at risk from a possible ECB policy error, whereby policy is tightened sooner than expected, driving up real interest rates.

To beat inflation, “your options are to buy things that yield more than 3% now. And that’s really difficult. Even in high yield that limits you to Single Bs, it limits you to Triple Cs”, Martin said, referring to the lower rungs of the junk debt market.

Bonds rated Triple-C — the lowest junk category — are the top performers in fixed income this year, delivering returns of 10%, according to BofA.

(Reporting by Yoruk Bahceli; Editing by Sujata Rao and Alison Williams)

Source Link Euro junk bond yields below inflation for first time

David Barret
David Barret

Related posts:

  1. Tennis – Azarenka calls for mandatory COVID-19 vaccinations
  2. Daimler expects Mercedes Q3 sales significantly below Q2 – report
  3. Motor racing-Bottas rules out imminent announcement on his F1 future
  4. U.S. to give Ukraine more than $45 million in additional humanitarian aid -Blinken

Filed Under: News

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • World’s Oldest Pots: 20,000-Year-Old Vessels May Have Been Used For Cooking Clams Or Brewing Beer
  • “The Body Is Slowly And Continuously Heated”: 14,000-Year-Old Smoked Mummies Are World’s Oldest
  • Pizza Slices, Polaroid Pictures, And Over 300 Hats: What’s Left Behind In Yellowstone’s Hydrothermal Areas?
  • The Mathematical Paradox That Lets You Create Something From Nothing
  • Ancient Asteroid Ripped Apart In Collision Had Flowing Water
  • Flying Foxes Include The World’s Biggest Bat And The Largest Mammal Capable Of True Flight
  • NASA Responds To Claims That Interstellar Object 3I/ATLAS Is An Advanced Alien Spacecraft
  • Millions Of Tons Of Gold Are In Earth’s Oceans, Potentially Worth Over $2 Quadrillion
  • The Race Back To The Moon: US Vs China, Will What Happens Next Change The Future?
  • NOAA Issues G3 Geomagnetic Storm Warning As 500,000 Kilometer Hole Sends Solar Wind At Earth
  • Lasting 776 Days, This Is The Longest Case Of COVID-19 Ever Recorded
  • Living Cement: The Microbes In Your Walls Could Power The Future
  • What Can Your Earwax Reveal About Your Health?
  • Ever Seen A Giraffe Use An Inhaler? Now You Can, And It’s Incredibly Wholesome
  • Martian Mudstone Has Features That Might Be Biosignatures, New Brain Implant Can Decode Your Internal Monologue, And Much More This Week
  • Crocodiles Weren’t All Blood-Thirsty Killers, Some Evolved To Be Plant-Eating Vegetarians
  • Stratospheric Warming Event May Be Unfolding In The Southern Polar Vortex, Shaking Up Global Weather Systems
  • 15 Years Ago, Bees In Brooklyn Appeared Red After Snacking Where They Shouldn’t
  • Carnian Pluvial Event: It Rained For 2 Million Years — And It Changed Planet Earth Forever
  • There’s Volcanic Unrest At The Campi Flegrei Caldera – Here’s What We Know
  • Business
  • Health
  • News
  • Science
  • Technology
  • +1 718 874 1545
  • +91 78878 22626
  • [email protected]
Office Address
Prudour Pvt. Ltd. 420 Lexington Avenue Suite 300 New York City, NY 10170.

Powered by Prudour Network

Copyrights © 2025 · Medical Market Report. All Rights Reserved.

Go to mobile version