Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today
Already have an account? log in
Nobody Panic About Junk Bonds Because What’s The Worst That Could Happen?
Right, so junk is under pressure again on Tuesday.
I'm not entirely sure what to make of the commentary on this. There's no "right" way to write about it. It's almost a "see no evil, hear no evil, speak no evil," type of deal.
Because if you're trying to keep people from panicking, just about the last thing you want to do is tell people "not to panic." The only thing worse than that is actually instructing people to freak out.
So the only option you're left with is to say something like
Try getting a near the market size bid for Junk bonds in a sharply falling market………….
Ok forgive me if this view is naive, but couldn’t the liquidity mismatch doomsday scenario be solved with large players emerging as market makers in the bond market? Seeing something like “Discounts to NAV…” tells me someone will always be willing to take the other side and try to arb that. Whether that fund runs itself into the ground is another story. Don’t get me wrong, I understand the dynamic, but the biggest issue with junk is default risk if holding to maturity; I assume these ETFs have most of the risk diversified away