Income Famished Investors And The Corporate Bond Market’s Irrational Exuberance

Rampant monetary inflation in recent years has gone along with the fanning of a hunt for yield by income-famished investors — and this is characterized by severe irrationality involving underestimating risks of loss. And so there has been a huge demand for corporate bonds, especially low-rated investment grade bonds (i.e., BBB) and junk. Equivalently this has meant a plentiful supply of cheap puts on equity.