Lates News

Investors in the $150 trillion global bond market are coming to the conclusion that some companies may be even safer than the most powerful governments. Government spending in wealthy countries is still increasing, with the average debt-to-GDP ratio of G7 industrialized countries expected to continue rising until the end of this decade. As a result, investors are demanding lower yields for bonds issued by companies like Microsoft, Airbus, L'Oral, and Siemens than for their own government bonds. While this phenomenon is not unprecedented, the huge demand for corporate bonds combined with fiscal retrenchment is causing more and more companies in developed markets to be added to this list. The erosion of the safe haven status enjoyed by a few countries (led by the US) for decades is a sign that populist politics are eroding the foundations of making tough fiscal compromises. Pilar Gomez-Bravo, Co-Chief Investment Officer for Fixed Income at MFS International (managing approximately $660 billion in assets) in London, said, "It is the erosion of perceptions of the rule of law that is making investors hesitant. Structurally, we do feel that the system is changing. People are more attracted to the balance sheets of companies in certain sovereign countries where the situation is better."