Alberto Gallo, head of macro credit research at RBS,
warns at FT, in a similar fashion to the warning coming from
Martin Feldstein and Robert Rubin:
High-yield bonds have had a record run. With a cumulative return of more than 150 per cent since 2009, they have beaten stocks in three out of the past six years. But the market is now stumbling, and regulators have highlighted signs of frothiness. With the end of the US Federal Reserve’s low-for-long policy in sight, investors are set for a rough ride.
Yields are near record lows and liquidity in secondary markets is declining, making it harder to exit swiftly. Reducing exposure earlier could be a wise decision...
High-yield bonds have sold off over the past few days, but things could get even worse if the Fed turns more hawkish. Liquidity in secondary markets is evaporating, and policy makers are shifting their focus to credit markets.
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