LONDON: The hunt for yield in an era of diminishing interest rates has lured investors into ever riskier regions of the bond marl(et, prompting some to ask: who is buying this stuff and are they suffering shortterm memory loss? In June, eurozone member Cyprus returned to the market just a year after international lenders bailed it out and the government forced bank depositors to forfeit uninsured savings.

Ecuador, which defaulted in 2008 and in 2000, raised $2 billion with a bond, and Kenya, troubled by attacks by Somalia-linked Islamist militants, had investors offer it more than four times the $2bn it borrowed via a debut Eurobond.

In April, twice bailed-out Greece, whose 2012 debt `restructuring` was classed as a default by credit rating agencies, borrowed 3bn euros in five-year bonds.

Investors expressed interest in buying 20bn euros worth.

All four issuers have speculative-grade credit ratings a warning flag that they could have trouble paying as promised.

Typically such borrowers offer relatively high interest rates to compensate for the inherent credit risk. But in a world of near zero interest rates and sub-3 per cent yields on US Treasury bonds or German Bunds, the rates being demanded for taking on significant additional payment risk have shrunk.

Kenya`s 10-year bond yielded 6.875pc at launch and Ecuador`s 7.95pc. The Cyprus bond offered 4.85pc.

The German or US governments used to pay such rates for 10-year domestic currency debt prior to 2000.

So who`s suddenly willing to throw caution to the wind? The Bank for International Settle-ments, the global forum for central banks, warned this week that a precrisis credit environment was re-emerging and that pension funds and other long-term investors are taking ever bigger risks.

`The one thing that is different between now and 2006/07 is that the protagonists... are no longer... the banks. Long-term investors are also joining in,` chief economist Hyung Song Shin said.

But how do they get sucked into lending to serial defaulters and near bankrupt nations? Some simply make a credit assessment and reckon this time will be different. Others assume they will not hold the securities long enough to find out.-Reuters