European Investors Flock to Eurozone Junk Bonds

The current low interest enviroment has made very risky assets more attractive and S&P is worried that this could be the start of another market fall if the unsophisticated investors do not take the risk factors into account.

Investors are flocking into junk debt in Europe without exercising enough discipline, putting the market at risk of repeating past mistakes, Standard & Poor’s warned in a comment on Wednesday.

“Are memories in the capital markets getting shorter?” the S&P report asked. “The global markets have just experienced one of the worst liquidity and credit dislocations since the Great Depression.”

While banking chiefs and others are calling for discipline, the lack of returns in money markets and investment-grade bonds is steering new money into the high-yield bond market, S&P said

CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza