In the current market, some bond investors in both the US and Europe are searching for yield, and seem to be ignoring preservation of capital, viz:

• bond buyers invested $2 billion last month in Ecuador, whose socialist president previously forced a default during the financial crisis
• China’s Logan Property Holdings Co., even though there are predictions of a slowdown in the nation’s real estate market, sold $300 million of bonds in May. Even though the developer has negative cash flow and total debt almost twice its cash and cash equivalents
• Hellenic Petroleum SA in Greece, who have had two bailouts in the past four years, borrowed the equivalent of $444 million last month. Not only this, lenders were so enthusiastic that they put in orders exceeding $1.37 billion
• Florida’s Orange County Industrial Development Authority issued $64 million of unrated debt last month to fund facilities near Orlando that convert sewage into fertilizer
• n Europe the first half of this year saw 15 companies raise bonds that were rated at the CCC to C level, says Dealogic, a rating described as “extremely speculative” or carrying “substantial risks”.

In contrast, the boards of global MNCs are, if anything, becoming even more conservative, avoiding any speculation with their cash (in many cases, even in their own business), viz:

• corporate America’s overseas cash pile is now some $950bn, and in the USA the top 1,000 companies have $23tn of cash on their balance sheets 
• all global MNCs have a ‘lowest risk’ investment policy, so they invest as much as they can in the ‘lowest risk’ options, and only then will invest very cautiously elsewhere. However, few are so cautious that they are investing in Australian local government bonds offering negative % of 18 bps
• some MNCs are even avoiding major currencies such as the euro and moving all their cash to USD
• some MNCs now limit their use of MMFs to US treasuries because they can understand where their money is, unlike with  some general MMFs in which it is difficult to understand exactly the precise investment risk. Although, generally the USD based MMF are gaining assets, while euro and sterling based fund are showing declines 
• use of tri-arty party repos is growing (slowly) in popularity, one the main reasons is that the corporate investor can understand the risks and have more control over the investments. 

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CTMfile take: This is the new normal and probably won’t change, even after the inevitable next financial crisis.