Bursting the bubble

Credit of the month

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Stephan Ertz
Deutsche Asset Management

The recent massive spread tightening in all investment-grade credit markets combined with an ongoing dismal outlook for the economy and continuing record high ratios of rating downgrades to upgrades, has posed the question whether we are experiencing a spread bubble in the euro corporate bond market which has to burst sooner or later.

The starting point for the recent market rally can be tracked to the decision of HSBC to take over Household. This was

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