An Insane Bond Market In 4 Charts: “Italian Junk Bonds Yield Less Than US Treasurys”

By Tyler Durden

In our “WTF Chart of the day” from last Friday, we showed something stunning: European junk bonds yields were the same, and in some cases lower, than comparable-maturity 10Y US Treasurys.

In other words, the distortion unleashed by Mario Draghi’s CSPP, or corporate bond buying program unveiled last March, has made European junk bonds “safer” than US government-issued paper.

These observations prompted BofA’s Barnaby Martin to ask overnight “Is Euro High-Yield the new US Treasury market?.”

Picking up where we left off, Martin writes that “inflow surges mean bubbles…and bubbles mean tight spreads. Perhaps no better example of this is the rapid price appreciation in Euro high-yield bond prices lately. In less than a month, Euro HY yields have declined (another) 55bp, reaching an all-time low of just 2.3%.”

Next, Martin redoes the chart up top, and repeats that “European HY yields have almost declined to the yield on BofAML’s US Treasury index” adding that while “there are indeed duration differences between the two markets, it doesn’t detract from the eye-watering levels that European high-yield has now reached.”

The results become even more eyewatering if one drills down on the “higher rated” European junk bonds, those in the BB bucket: here the relative …read more

Source:: ZeroHedge