High yield corporate bonds are the next sub-prime crisis
Christopher Joye | Coolabah Capital Investments | 18 February 2020
The search for yield is forcing investors to chase income by assuming more risk. Corporate bond spreads are now tighter than they were before the Global Financial Crisis, yet corporate leverage is higher. In contrast, financial bond spreads are up to eight times wider than 2007 levels, while bank leverage is less than half that which prevailed before the crisis. Buy financials, sell corporates.