Complacent credit markets underpricing risk

After years of easy money and copious liquidity in the financial system, we believe credit markets a...

After years of easy money and copious liquidity in the financial system, we believe credit markets are underpricing risk as issuers take full advantage of extremely benign conditions. The CBOE volatility index, known as the fear index, is at multi-year lows, back at the level it was just before the Federal Reserve wrong footed markets with an unexpected rate rise in February 1994. It was Ben Bernanke who coined the phrase global savings glut, which helps explain why medium- and long-dated bond yields are lower than they might otherwise be. This glut is fed from a number of sources. Mature...