Part 2/8:
Recent developments in countries like France indicate a troubling trend within governments’ handling of their debts. The recent collapse of the French government has led to corporate rates falling below those of state obligations, while government debts have risen to alarming levels. This shift from public trust to private investment reflects an increasing skepticism towards government bonds.
In North America, one of the largest pension funds has also pivoted towards corporate bonds after conducting due diligence. The firm concluded that in a default scenario, assets associated with corporate bankruptcy can yield returns, unlike government defaults. This thinking is persistent across financial institutions, allowing them to navigate potential financial turmoil more appropriately.