Regular readers will recall that I have continually decried the fact that the central bank-inspired hunt for yield is driving otherwise sane investors down the quality ladder.

That is, when you can’t get any yield in high quality assets, you invariably search for income elsewhere. In what is surely (and hopefully) an exaggeration, I’ve used the following meme to illustrate the point:

And although that is, again, an exaggeration, it’s worth noting that investors were recently so hungry for a 9.4% coupon that they were willing to literally finance a $30 million golden parachute for an outgoing executive (see here).

Well keep in mind that this voracious buying of anything that offers some yield in turn drives spreads on those assets tighter. In other words, the more appetite there is, the less you’ll be compensated as everyone piles in.

For those interested in understanding just how acute this dynamic truly is, consider the following chart from Goldman which shows that if you’re buying the sh*ttiest of sh*tty credit, your risk premium is almost completely gone.

Via Goldman

Don’t forget what Jeff Gundlach said in January:

Junk bonds had the same return as equities. The pattern is exactly the same. This is not going to happen again. The junk bond market is not going to mirror the stock market as it’s no longer as much of a credit story as it was entering 2016. It’s now more of an interest rates story with that spread cushion gone.