No ordinary recession points to risk within a non-ordinary recovery

In recent months, the corporate bond market has been firmly in positive territory. Relevant indices have risen to their highest levels of 2009.

Furthermore, the spread between the yield offered by corporate and government bonds has narrowed to levels not seen since before the collapse of Lehman. Technical factors rather than fundamentals have been the main drivers of credit markets for several months now. Near-zero interest rates, combined with a wall of money pumped into the economy via QE, not only provided a floor for crashing valuations – they have also spurred an incredible credit rally. Normally, the magnitude of this rally would have taken years to fully manifest. However, these are not normal circumstances, and the ra...