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Draghi Bond  Rally Fails
World Economy

Draghi Bond Rally Fails

Europe’s biggest corporate-bond rally in more than three years is already sputtering. Bloomberg reported. Returns from investment-grade corporate bonds in euros have slowed to 0.4% in April, the lowest this year, based on Bank of America Merrill Lynch index data. That’s down from 1.6% in March, the best month since July 2012, when prices surged following the European Central Bank’s announcement that it will start buying non-bank corporate debt. The slowdown suggests lower yields are encouraging investors to turn to other assets, such as overseas debt and junk bonds. That may support ECB President Mario Draghi’s efforts to encourage investment as he seeks to drive up inflation and economic growth. “The ECB wants investors to take more risks,” said Craig Veysey, head of fixed income for the private wealth arm of Sanlam Group, which manages about £40 billion ($58 billion) of assets. “It has squeezed returns out of the areas where it is expected to make purchases.”

 

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