Here's Deutsche's Jim Reid on junk bonds - where both defaults and yields are now far lower than they were in the 1980s - in Thursday's Authur's note: It's a top-level discussion of Deutsche's recent default report. The general idea is that the incredibly low default rate over the last decade has been driven by trickle down from the exceptional demand for fixed income that has rolled on from one marginal buyer to another over the last 10 years or so. From Reid's Schumpeterian Thursday morning note: Our opinion is that the BoJ is the latest runner with this demand baton which may in turn actually force others into the race (ECB in the future?), or encourage others to carry on QE for longer (the Fed?) thus reinforcing this artificial demand for fixed income. While such technicals remain in place its hard for defaults to rise significantly in the foreseeable future even with what is weak growth, average fundamentals, credit deterioration and a rise in more risky deals. However is it healthy that the default/insolvency cycle is being sedated in so many large economies? Surely the financial system and life in general has prospered through history on the basis of creative destruction. Indeed all the good looking and intelligent readers of this note are products of survival of the fittest. Economic growth over time is helped by a regular cleansing. So are low defaults helping to lock in low growth for years to come across many large economies? Clearly there are other factors at work here but we think that what's great for credit investors isn't necessarily good for the global economy. A bit of a paradox. We would stress that we fully understand why the authorities wouldn't want free markets to operate today as the risk of a huge global default and unemployment cycle would still be very high. However their intervention has a cost in our opinion. Socially this might be worth paying but we do think it exists. We'll put the original Deutsche report in the usual place. Well worth a glance. Related link: From junk bonds to... FT Alphaville Charting not-so-high-yield bonds - FT Long Short