Junk bond boom in Sweden raises concerns over QE ‘gasoline’

One year after Sweden’s corporate bond market suffered its worst crisis ever, buyers and sellers have roared back to life, with the riskiest debt now enjoying a boom fed in part by central bank cash.

Karin Haraldsson, a portfolio manager at Lannebo Fonder AB, says there was still “a lot of money on the sidelines ahead of year-end as investors wanted to keep some ammunition dry in case the market deteriorated.” But even those investors have now started buying. | Photo: Lannebo/PR

"Not only are there more issues, but the book sizes are significantly larger," said Ivan Adzaip, a debt syndicate banker at Swedbank AB in Stockholm. "If this continues at this pace, we should expect 2021 to be a record year, at least on the high-yield side."

Adzaip says only two issuers turned to Sweden’s junk bond market in January last year. By March, investors started to bolt as a pandemic-driven panic ultimately led more than 30 Swedish fixed-income funds to temporarily shut their doors on redemptions, in a frantic effort to hold on to liquidity.

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