Low interest rates and virtually no investment grade fixed income make higher risk options, like high yield bonds, infinitely more attractive.

But as investors plough into these investments, Coutts of London, the high-end private bank, has reportedly been advising clients to retreat from the market due to growing fears of a credit bubble.

High yield, or junk, bonds performed superbly in 2012, with issuance in the global high yield corporate bond market hitting a record over the course of the year.

In the year to end of March 2013, high yield bond funds returned more than 10%, performance which will be difficult to replicate. However, the potentially lower growth prospects within the sector for the coming year have done little to discourage investors from sinking money into these investments.

Inflows into HY bond funds for the first three months of 2013 have been bouncing up and down but with them taking in around US$1bn over the period, investor appetite for junk bonds remains strong.

The question, and the worry, is will the healthy inflows into HY bonds mar or destroy the upside investors have been receiving and result in a collapse of this part of the market?

According to Coutts, it just may do so. Senior managers at the bank are said to be concerned about investors borrowing money to further augment their HY returns. This practice not only leads investors to taking on more risk but also potentially inflates bond prices, thus driving down yields.

But will this really create a bubble in the HY market? It largely depends on the research being done ahead of purchase.  A bubble is the result of people blindly buying into investments (be they stocks, bonds or real estate) without looking at the fundamentals of the names they are buying.

It is not surprising that most high yield investment managers say that despite the capital inflows into HY bonds, the market has yet to venture into bubble territory.

“A lot of the high-yield buying today is focused on yield since most other classes of bonds have low coupon rates. However, if prices rise too far, the yield won’t justify the investment and I think the money flow will slow down,” says one such manager.

That said, the potential for the creation of a bubble in this sector of the market persists and investors would do well to scrutinise any decision they take in this regard to save them from being the proud owners of investments bound for default. займ на карту срочно без отказа займ по паспортным даннымзайми просто займсамый безотказный займ