(1)
VALUATIONS: stretched, filled with anti-gravity anomalies, across Bonds and Equities.
Several European BBB-rated bonds trading at negative yieldso In November 2017, Veolia successfully issued a 3-year EUR denominated bond with a negative yield of -0.026%, the first time for a BBB rated issuer (
source:
MarketsInsiders
)
o In Jan 2018, Auchan rated BBB+, issued a 2year floating rate note was priced at a yield of -29basis points, currently trading at -28bps (
source:
Grant’s
)
o Anglo American 2020 bond (rated BBB-), currently trading at 14bps, after having spiked up to 14% just two years ago
The 2 year Greek Government Bond is now trading almost 100bps lower than the 2year US yield. Greece is rated B- by Fitch and US is rated AAA by the same agencyIs all this due to Central Bank flows? Yes of course. Make sense? Of course not. Indication of a sensible and sustainable market? Probably not. Probability that insanity (and instability) permeates to nearby asset classes, i.e. equity? High.