Foreign media reports, IHS Markit data show that the world has up to $ 55 billion of high-yield bonds (commonly known as “junk bonds”) were shorted by borrowing, the total amount is approaching a new high since the global financial tsunami in 2008. This amount is much higher than the $35 billion earlier this year.
Janus Henderson portfolio manager Tim Winstone said: “If yield spreads tighten and/or people are worried about rising interest rates, short selling could continue to increase. (Junk bond) valuations are at such high levels that I wouldn’t be surprised if more people like hedge funds join the short-selling bandwagon.”
Not only junk bonds light position increased greatly, German government bonds also by the “air force” siege. Mizuho (Mizuho) multi-asset strategy director Peter Chatwell said, short selling German government bonds position to “extreme” water level, the market is convinced that the German bond yields will rise. German 10-year bond yields turned negative in 2016 and have not returned to positive values for more than two years. However, now that inflation expectations have popped up, some believe that German bonds will be in big trouble. German 10-year bond yields rose to minus 0.16% last week, a new high since the outbreak of the epidemic.
Sandra Holdsworth, head of Aegon Asset Management, believes that the situation will change and that Germany’s political situation could change, with more debt issuance expected in the future. At the same time, the EU will also have to issue treasury bonds, will erode the demand for German debt. She estimated that the German 10-year debt interest rate will turn positive in this year.
NatWest Markets pointed out that although the European Central Bank increased the code to buy debt, after three weeks in April, the weekly amount of debt purchases increased to 112 billion euros, higher than the previous three weeks of 87 billion euros, still can not depress the German bond interest rates, showing that private investors are “very happy” to sell their German bonds, announced “German debt super cycle ends” (end of the Bund supercycle).
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