The level of US corporate bond market has reached worrying signs. In a search for higher yields than Treasuries, many were willing to dip their fingers there. Two things could shake the calm waters: a rise in US interest rates or a weakening USD. As mentioned by Citigroup below, the unusual factor here is that most of the papers reside with just 3 types of investors. Most worrying are the mutual funds - if confidence is shaken, they could exit in droves, and cause a cascading effect for others scrambling to get out. Watch this space. NEW YORK: For all the concern that Wall Street’s shrinking bal- ance sheets will fuel a liquidity crisis when investors flee credit markets, Citigroup Inc strategist Stephen Antczak said investors may be overlooking an even big- ger catalyst. The size of the US corporate bond market has ballooned by US$3.7 trillion (RM13.84 trillion) during the past decade, yet almost all of that growth is concentrated in the hands of three type...
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