“An extremely low-yield environment forces people to take risk,” Sheila Patel, a managing director at Goldman Sachs Asset Management, said yesterday in a Bloomberg Television interview. “Doing nothing is risk because there are targets to be met and pensions to be paid.”

Elsewhere in credit markets, the cost of protecting corporate debt from default in the U.S. fell, with the Markit CDX North American Investment Grade Index, which investors use to hedge against losses or to speculate on creditworthiness, declining 0.7 basis point to a mid-price of 75.6 basis points as of 8:53 a.m. in New York, according to prices compiled by Bloomberg.

The measure typically falls as investor confidence improves and rises as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Rate Swaps

The U.S. two-year interest-rate swap spread, a measure of debt market stress, was little changed at 17.63 basis points as of 8:53 a.m. in New York. The gauge widens when investors seek the perceived safety of government securities and narrows when they favor assets such as company debentures.

Bonds of Royal Bank of Canada are the most actively traded dollar-denominated corporate securities by dealers today, accounting for 6.9 percent of the volume of dealer trades of $1 million or more as of 8:53 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.


Stock Shift

Institutional investors such as corporate and public pensions have reduced their median allocation to U.S. bonds from 32 percent of their assets in the last three months of 2011, according to data compiled by Wilshire Associates Inc., whose Trust Universe Comparison Service tracks more than 1,700 plans.

The current proportion of dollar-denominated debt holdings is the least since the fourth quarter of 2007, Kim Shepherd, a spokeswoman for the firm, said in an e-mail.

“There is movement by institutional investors out of investment-grade bonds,” said Eileen Neill, a managing director in the consulting division of Wilshire, a Santa Monica, California-based financial advisory firm. “It’s not out of fear of bonds, it’s out of necessity because of the low yields. They’re moving to higher yielding bonds and emerging markets debt.”