In 2001, Thomas Buberl wrote a PhD thesis on corporate bonds, painstakingly demonstrating a feature of global markets that every good fund manager knows to be true: government debt always wins.
No matter what the economic weather, investors always rate government debt more highly than bonds issued by companies, and for good reason. In a tight spot, a government can (almost) always pay back its debts, by whacking up taxes or even printing its own money. Companies have no such luck, and pay more to borrow from investors as a result.
Buberl is now chief executive of Axa, the French insurance giant, whose bonds did something extraordinary earlier this month: they beat the French government. France’s politics are a mess again, and its government bonds are suffering, sending their yields, and the country’s borrowing costs, spiralling higher. Bonds issued by Axa, meanwhile, remain in high demand, making this one of numerous French companies at which bond yields sank below the government’s in mid-September.