The strong rally in corporate debt markets triggered by a flood of central bank stimulus is spooking veteran bond investor Dan Fuss, who warns that investors are taking the most risks he has seen in the past six decades.
Central banks last year sharply cut interest rates and unleashed vast bond-buying programmes to soften the economic impact of the pandemic, at a scale that even dwarfed measures taken to combat the financial crisis.
The stimulus has helped produce a remarkable market comeback, lifting stocks to record highs and helping pin government bond yields near historic lows. But the investor scramble for higher-returning but lower-rated, riskier debt is now so ferocious it is unnerving money managers like Fuss, the vice-chair of $353bn investment house Loomis Sayles.