Fear Is Coming Back to the Junk Bond Market
View original at finance.yahoo.comFear Is Coming Back to the Junk Bond Market (Bloomberg) -- Junk bond investors are getting more skittish about risk. An index of CCC rated bonds in the US has dropped nearly 0.8% over the month ended Thursday, underperforming the broader high-yield market as investors increasingly avoid the riskiest debt…
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There is a greater level of caution at the first whiff of potential problems right now
80% confidenceMore consumer-related sectors within high-yield are weakening, like subprime lenders and retailers that cater to lower-end consumers
80% confidenceInvestment-grade spreads still close to historical tightness at 81 basis points while high-yield spreads aren't is a trend to watch
80% confidencePrevious breakouts in distressed supply from troughs have signaled the start of a notable bout of risk aversion
80% confidenceCredit spreads were a little unnaturally low in July
80% confidenceWhile the share of distressed debt is small on a historic perspective, it's quite large compared to prior periods when you've had very tight spreads
80% confidenceThere's not much room to sweeten the terms of $1.9 billion debt swap proposal
80% confidence$600 million bankruptcy financing was needed to prevent immediate shutdown
80% confidence