Hard lessons from high yield bonds

Over the last couple of years, European investors have learnt about the opportunities and dangers of high yield bonds the hard way. Two years ago, there was tremendous excitement about the prospects for investment grade and high yield bonds in Europe. Demand was expected to grow strongly as European governments encouraged individuals to provide for their own retirement. At the same time, the introduction of the euro transformed Euroland into a gigantic single market for securities. Almost overnight, it became possible for a German investor, for example, to buy securities in any of the...