The first quarter of the new decade was characterised by a hunger for yield.
Record low interest rates have fuelled an appetite for risk, which at times is overwhelming. By way of example, the new Matalan 9.625% subordinated bond issue was reportedly 10 times over-subscribed. The Bank of America high yield index (BB-B) generated a total return of 8.5% over the first quarter, far beyond most expectations. Bank capital securities accounted for a large part of that gain, with RBS the performance leader. The Royal Bank announced a £6bn tender of perpetual securities in order to (a) mollify institutional investors and (b) book an accounting profit. The average doll...
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