MOSCOW: If you’d bought European high-yield bonds the day the global financial crisis erupted, closed your eyes and held onto them through the unprecedented events of the following decade, you would now be sitting on a 100% return.
On the other hand, if you’d put your money in most major commodities, other than gold, you would have lost 50%.
The euro and European stocks would have handed you a loss, but most bond markets, US stocks and the dollar would have been a good bet.
Bond markets subsidised by the world’s largest central banks with asset-purchase programmes that swelled to almost US$14 trillion may help explain why debt to Europe’s most leveraged companies came out on top.
With European Central Bank president Mario Draghi promising to do “whatever it takes” to hold together the euro zone, investors were emboldened to lend to the riskiest companies while yields on government debt turned negative.
Healthy returns in major global assets – including those that helped spark the financial crisis – are among the “great ironies” of the past decade, Jim Reid, global head of credit strategy at Deutsche Bank AG, said in a research note last week.
Of course, the moves weren’t straight up. The euro tumbled 14% and the S&P 500 lost as much as 57% from its 2007 record before tripling in the eight years starting in 2009. The Bloomberg Barclays Pan-European High Yield Index lost 38% in 2008. — Bloomberg
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