The bigger the better - in everything. Freddie Mercury, the late lead singer of Queen, wasn't alone in judging the world and its wares solely on the merit of size. Take bond investors. When the Federal Reserve announced its intention to begin tapering its quantitative easing programme last May, expectations were of an inexorable rise in US yields. For debt investors, this offered the promise of higher returns on their bond purchases - at least those denominated in US dollars. But Treasury yields, after spiking last summer, and again when QE tapering kicked in in December, settled down at a lower rate than many had expected. For market participants, this has meant another year where the hunt for yield grinds on. With cash-rich accounts seeking alternative strategies to optimise their returns, the knock-on effect has been to compress spreads, meaning that the higher-yielding asset classes are not as high yielding any more, thus adding to the downward spiral.
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