22 January 2014 by HCM
The hunt for yield has led investors to look implicitly for leverage. They cannot buy enough of any hybrid or Coco brought in abundance to the market by their favourite investment banker… And corporates are also doing their bit in increasing the leverage of the market. Some are buying back their stocks, others borrow to pay dividends. And if they do not do it fast enough, they fall prey to activist investors. For instance, Third Point took a significant stake in DOW (The Dow Chemical Company), calling for a split of the company. That put a dent in the usually well behaved curve of its 5y CDS spread.