Bonds: The cost of getting it wrong is higher now

Investors likely to rush for exit

Liquidity in the corporate bond market has been a focus in recent years and the Bank of England and FCA have been paying particular attention.

Corporate bonds have been popular as quantitative easing has kept interest rates (and corporate defaults) low and incentivised investors to search for yield. Much of this money has found its way into corporate bonds as they are seen as a natural substitute for lower yielding government bonds. This has been a global phenomenon, with an increase in supply of bonds, as companies have taken advantage of demand. On its own, the increase in the size of the corporate bond market is not a bad thing, most aspiring economies look to have healthy capital markets for debt securities. The conce...