Thursday, April 4, 2013

Credit Market Watch Q1 2013: High Yield Bonds, CLOs, Leveraged Loans, BDCs, $HYG, $BKLN (Linkfest & Charts)

Before I get into the high yield linkfest, check out the charts of $HYG (iShares High Yield Corporate Bond ETF, see yield info as well), BofA Merrill Lynch's High Yield Master II Effective Yield (5.88%), and BofA Merrill Lynch's High Yield Master II Option-Adjusted Spread (4.84%). You can see how the Fed's QE program and ZIRP lowered high yield bond yields significantly and tightened spreads to Treasuries since the financial crisis and bailouts in 2008/2009. The 10-year Treasury bond yield closed yesterday at 1.83%, which is still a historic low (a low not seen during the past 140 years).

Source: StockCharts.com (*yields are after the jump*)

source: iShares

Source: St. Louis Fed, BofA Merrill Lynch

Source: St. Louis Fed, BofA Merrill Lynch


Be careful with this asset class. There could be a correction any moment now. Guggenheim's CIO Scott Minerd recently warned that "asset valuations are becoming more extended, making risk assets such as equities and below investment grade debt vulnerable to a near-term setback." And David Stockman, former White House Budget Director under President Reagan, recently told Bloomberg TV that "CCC rated debt is now trading under 6%. It's crazy. Nothing like that would've even been remotely thought of 4 or 5 years ago."


High Yield Linkfest

Thomson Reuters' Debt Capital Markets Review For Q1 2013 (PDF via Thomson Reuters Deals Intelligence on Twitter, emphasis mine)

Source: Thomson Reuters
"STRONGEST ANNUAL START FOR GLOBAL HIGH YIELD ON RECORD - The volume of global high yield corporate debt reached US$132.0 billion during the first quarter of 2013, a 22% increase compared to first quarter 2012 and the strongest annual start for high yield debt activity since records began in 1980. High yield issuance from issuers in the United States accounted for 60% of first quarter activity, compared to 71% during the first quarter of 2012. Issuance from European issuers increased 58% compared to the same time last year.

GLOBAL ABS UP 26%; CDO/CLO ACTIVITY ACCOUNTS FOR 24% - Global asset backed securities totaled US$90.8 billion during the first quarter of 2012, a 26% increase compared the same time last year and the best annual start for global ABS since 2007. Collateralized debt and loan obligations totaled US$21.8 billion during the first quarter, more than triple issuance during the first quarter of 2012 and accounted for 24% of the quarterly ABS total."


Surge in High-Yield Bonds a 'Big April Fool's Joke' (CNBC)

Sponsors push for flexible terms on high yield (Financial News)

Europe's insurers look to high-yield in strategy shift (The Business Times)

Coutts warns clients of threat from debt markets amid bubble fears (The Telegraph)

Analysts dispute high-yield bubble talk (Interactive Investor)

Market Vectors Launches Treasury-Hedged High Yield Bond ETF (THHY) (ETF Daily News)

As the Pace of China’s Junk Bond Sales Grows, So Do Worries (NYT's DealBook)

Goldman Sachs moves into BDC market (Fierce Finance)

Goldman Sachs and the Next New Thing on Wall Street (CNBC's NetNet)

Leveraged Loan Volume Nears Record Amid Refinancing Frenzy (Forbes, see chart)

Cash inflows to leveraged loan market soar in first quarter, thanks to CLOs (LCD's LeveragedLoan.comsee chart)

Leveraged loan default rate hits 2-year high thanks to directories deals (LCD's LeveragedLoan.com)

Leveraged Loan Gains Smallest Since 2008 as Fed Sees Froth: Credit Markets (Bloomberg)

Fifth Anniversary of the Credit Crisis: Should you Buy CLOs? (David Schawel at CFA Institute)

PowerShares Senior Loan ETF Tops $3B in AUM (Benzinga)

State Street Lists Active Senior Loan ETF (Index Universe)

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