Stunted issuance, resulting in bond sales down 59 percent year on year, has helped a 123 basis points tightening in high-yield spreads since early January.
Just last month Europe high-yield borrowers were forced to pay eye-watering premiums to get their deals over the line as they grappled with the overhang of the fourth quarter’s volatility. But the situation is changing rapidly as swelling cash balances rekindled appetite. Inflows have totaled about $1.3 billion this year.
For now though, some investors are staying cautious on lower-rated names after suffering steep secondary market losses in the fourth quarter of 2018.
“We’re back on the hunt for yield due to the low rate environment but we remain selective as we think there are still lots of specific risks,” Cohen said. “So far the market is outperforming expectations and we’re unsure of how long this will last.”
Bloomberg, Laura Benitez, 2019-03-15, “Balance Tipped in Borrower’s Favour in Europe’s High Yield Market“