EC Thoughts On Bank Debt

I summarize it this way: those throwing money into bank debt do so to earn money but not take interest rate risk. In the process they absorb more credit risk than prior generations of bank debt investors took on.

I have often invested in bank debt in the past, but I am not doing so now. I think the credit risk is a lot higher than before, and not worth taking the risk in order to get a floating rate for returns. Instead, I have invested in short-term bond funds with high credit quality. Less yield, but more security.

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Jason Green 2 years ago Member's comment

Good read.

Gary Anderson 2 years ago Contributor's comment

Banks give floating rates betting that rates will stay low, with a little squeeze upward in order to fleece the loan recipients.