Asia-Pacific News

Junk Yields Signal the Return of Greed: Bove

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Markets are back to being greedy, Richard Bove, banking analyst at Rochdale Securities said Tuesday.

Investors have already forgotten about the lessons of the past year by aggressively putting  money to work, and the biggest sign of greed is the yield on junk bonds, Bove told "Squawk Box Asia."

Shift in Financial Power
Shift in Financial Power

“In the midst of the crisis, about a year ago, I think it was last November, the yield on junk bonds were over 25 percent and today the yield on junk bonds is 11.5 percent," he said. "What that’s telling you is that the appetite for risk has returned pretty dramatically on Wall Street."

Investors are simply not going to accept the low returns on risks that they accepted 12 months ago, Bove said, adding that this as a sign of how much the U.S. financial system has changed.

"I think the banking system itself is somewhat like a turtle crawled back into its shell," he said. "It’s so afraid of another run that we're not seeing money put into loans, but what we're seeing is a big build-up in liquidity.”

The United States must work towards maintaining its competitiveness in the financial world, with the U.S. dollar facing being dethroned as the world's currency five years down the line, he added..

“The United States was for the last 70 years the dominant financial country in the world," he said. "There is no guarantee that will continue.  In fact all of the signs show that it will not continue.”