>HEADING FOR THE GREAT REPRESSION?: Investing in a world of government-suppressed real yields

Investing in a world of government-suppressed real yields

■ Every credit investor should consider the following: Why are real yields in so many countries near historical lows despite historically poor fundamentals?


■ One key reason is that burgeoning government debt burdens are leading to ever more measures to influence market pricing.


■ Financial repression takes many forms, but the primary aim is to keep real yields below market clearing levels. Some policies are already in place, many more will likely follow.


■ Central bank balance sheet expansion alone corresponds to almost half the increase in general government debt in the US, the UK and the Eurozone since 2008 (Figure 1).


■ To begin with, repression seems likely to drive more money into risky assets like credit.


■ Longer term, however, history suggests the distortions and even bigger imbalances need to correct with a very negative impact on credit spreads.


■ Even during the benign period, volatility and uncertainty are likely to be far higher than investors have grown used to, thanks to abrupt and far-reaching changes in policy.

To read full report: GREAT REPRESSION

RISH TRADER