Photo: AFP/Jewel Samad

Bloomberg reports that the summer bond rally in the US may be coming to an end:

For Eaton Vance’s Kathleen Gaffney, it adds up to a market with all the hallmarks of a mishap waiting to happen. “It can be hard to know the exact moment of a top, but the signs are clearly there,” said Gaffney, who’s been buying and selling bonds for more than three decades. Last week, there were indications that the 18-month long rally in junk bonds may finally be starting to end. Triggered by mounting tensions between the U.S. and North Korea, the notes slumped to their weakest level since April as Morgan Stanley flagged the beginnings of a correction.

US high-grade companies are on track to break records, having sold US$1 trillion in bonds already this year. Junk bond yields have fallen to post-crisis low, with investors eager to finance companies like the unprofitable Tesla. The trend can be seen in M&A financing as well, with Japan’s SoftBank Group finding US$65 billion to fund a takeover of Charter Communications, which has US$63 million of debt on its balance sheet. SoftBank’s total debt has reached US$130 billion.

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