High Yield Bonds

Credit metrics will continue to deteriorate in the next year or two, but European high yield bonds in particular are pricing in too severe a downturn, says Mark Holman

With some UK bank bonds now trading with higher yields than their counterparts in Turkey, Mark Holman questions whether the dumping of UK and sterling assets has gone too far.

While economic uncertainty in Europe is building, the healthy cash balances and low refinancing needs of Europe’s high yield bond issuers make a spike in defaults unlikely, says George Curtis.

With Europe facing an energy crisis and the UK bracing for a five-quarter recession, a strong allocation bias to the US seems a no-brainer. However, George Curtis says that when looking at relative value in fixed income, the decision is never that simple.

Pierre Beniguel explains why high yield issuers are selling new bonds at steep discounts to par value, and why this represents an opportunity to build potentially significant performance into fixed income portfolios going forward.

US banks remain bullish about the health of the consumer, but credit spreads are still pricing in not only a recession, but a fairly severe one. Are the banks wrong? Or have credit markets just backed up too far on negative fund flows?

With Heimstaden showing its commitment to corporate hybrids with a €600m tender offer, Pierre Beniguel looks at the complex decision issuers have to make and says more could follow suit with bonds trading at steep discounts.

After H1 2022 broke market records for all the wrong reasons, Gary Kirk says fixed income outflows could reverse quickly if investors see evidence that central banks are turning the tide on inflation.

The US high yield market has experienced the third lightest month in terms of new issue flows since the Global Financial Crisis. Chris Holman explains what this means for default rates going into the second half of the year.

For all of these observations, there is one common observation – yields did not stay at these high levels for very long.

European high yield supply has endured its weakest start to a year in over a decade. The total supply to May 13th equalled €12.89bn, a fall of 75% year on year, with the market effectively closed for a large portion of the year.

With investors having endured a painful period of rising yields in 2022, Mark Holman looks at whether rates weakness or credit spread widening has been most to blame.