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The fixed-income markets have produced some of the biggest returns ever this year, as central banks around the world have pumped out trillions of dollars of liquidity. Investors seeking higher yields extended their positions further out the yield curve and into riskier instruments. The high-yield bond market has been among the best performers. Fed chairman Ben Bernanke said on October 9 that the US central bank is ready to tighten policy when conditions warrant. His comments, which were aimed in part at bolstering the slumping dollar, sparked temporary sell-off in the bond markets as investors concluded that the Fed was closer to raising interest rates than previously thought. The mood of financial market participants in the third quarter contrasted starkly with that of a year earlier, when the darkest days of the financial crisis raised fears of an economic depression, according to Advantus Capital Management.
Taking Away The Punch Bowl Could End Rip-roaring Party In The Credit Markets Gordon Platt Global Finance; Nov 2009; 23, 10; Docstoc pg. 54 Reproduced with permission of
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