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BOFA BACKS CREDIT AS BUBBLE HEDGE

In my last blog, I wrote that Barclays thinks it might be time to hedge, given fading momentum and some key risk events coming up.

If you believe that the technology sector is a little bit bubbly, then Bank of America recommends long credit as a hedge.

"Bubbly markets are prone to cracking when financial conditions tighten," writes BofA. "Owning corporate bonds looks the best hedge for this, in our view."

They note that within European credit, the tech sector has been anything but bubbly, and returns have been some of the worst across the market this year.

There have been some concerns about whether huge bond issuance by the big hyperscalers could be absorbed, with many borrowing in euros, sterling and the Swiss franc.

But Alphabet's GOOGL.O foray into the equity market to raise funds, rather than debt markets, should be a positive sign.

"We see this helping placate investor fears over endless bond supply − a valuable ingredient that could help catalyse a rally in the sector," they say.

(Samuel Indyk)

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EARLIER ON LIVE MARKETS:

TIME TO HEDGE? CLICK HERE

TECH DRAGS ON STOXX BEFORE U.S. PAYROLLS CLICK HERE

EUROPE BEFORE THE BELL: MUTED START CLICK HERE

SMALL MISS, BIG HIT CLICK HERE