Friday, April 18, 2014

Junk Bond Yields in Europe at 4%, Issuance at All-Time High

Seems crazy but I suppose it will continue for awhile longer. 

Investors' appetite for riskier debt grows in Europe

High-yield corporate debt issuers have sold €18.5 billion ($26 billion) of euro-denominated bonds since January, according to Dealogic. That is a record, and roughly 17% more than at this point a year ago.

Amid persistent low interest rates, issuers have been able to negotiate favorable pricing. The average yield on euro-denominated junk bonds hit 4% last week, according to a Markit index, down more than two percentage points in the past year.

The trend toward weaker protection for debtholders mirrors a shift in Europe's corporate lending market, where there has been a rise in covenant-lite deals recently. Almost €3 billion of the €25 billion of euro-denominated leveraged loans issued this year have been covenant-lite, the highest year-to-date figure since Dealogic started tracking such deals in 2006.

But overall demand from investors for high-yielding debt shows little sign of waning. European high-yield funds have seen net inflows of almost $13 billion this year, according to EPFR data.

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