FIG investors’ search for yield reaches fever pitch

By Bill Thornhill
12 Jun 2019

The fall in absolute yields to new record lows has heightened investors’ search for FIG bonds that offer an attractive pick-up. As a result, investors have favoured higher yielding senior non-preferred transactions from the eurozone periphery, ultra-long dated covered bonds and higher yielding central European and Asian covered bonds. By contrast, demand for lower yielding core European covered bonds, while still healthy, has begun to wane following the exuberant levels of demand witnessed in May.

Outright yields continued to fall over the past week with the 10 year composite Bund yield hitting a new record low of minus 0.26% in the past week. Consequently, CreditSights this week upgraded its recommendation on European senior non-preferred debt from “Market Perform” to “Outperform”.

The change ...

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