Bloomberg had some interesting news this morning. Apparently, we’ve reached the point where we have the equivalent of insurers asking arsonists to start more fires.
You heard that right. That’s exactly what junk bond yields at 4.09% amount to in a maniac market being driven by the anomaly of “reverse inquiry”:
Money managers are having such a tough time getting their hands on debt in the $2.8 trillion market for junk bonds and leveraged loans that they’re calling up companies and pressing them to borrow, instead of waiting for bankers to bring new deals to them…..a process known as a reverse inquiry.
More than $16.2 trillion of bonds globally carried negative yields as of Thursday, a near record high…. That’s made investors around the world increasingly eager to buy riskier securities that might pay more yield. In the U.S., January was the third-busiest month ever for junk bond sales, with companies borrowing more than $50 billion thanks to strong demand.
Average U.S. junk yields have been driven down to just 4.09% as of Thursday, a record low, according to Bloomberg Barclays index data.
Good job, Fed!
Do these fools have a clue as to what the overwhelming bulk of proceeds from junk bonds and junk loans are used for? Here’s the spoiler alert: It’s not new jobs, new equipment, new output or new societal wealth.