Despite a rush in deals by high-grade non-financial firms, there's effectively a EUR 21bn (USD 25bn) drop in the investable pool of euro bonds because of calls, buybacks, upcoming redemptions and European Central Bank debt purchases, according to Bloomberg calculations.
Dwindling supply will typically limit liquidity in credit markets, making the pricing of risk more challenging. The issue is already prevalent in Europe's sovereign bond market, where central bank dominance has sapped volatility, crimped trading volumes and squeezed out investors in what’s known as "Japanification."
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