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’Does junk predict a funk?
Or: do wide high yield spreads over US Treasuries predict a recession?
We ask because this is an interpretation we’ve seen a fair bit in the media over the last few weeks.
And if true, it’s especially alarming since on Tuesday the BofA Merrill Lynch High Yield Master II Index,
The junk rally and buyout bailouts, updated
Bloomberg Businessweek has an update on the latest refinancing efforts of Energy Future, previously called TXU and once known as The Biggest Leveraged Buyout of All Time.
Bought for $43bn by private equity groups KKR and TPG in 2007,
Synthetic junk
Here’s an interesting Wednesday story from the Financial Times’ Aline van Duyn.
It concerns growing demand for a synthetic product — this time linked to junk, or high-yield, bonds. The market size of the product (which is tranched and linked to Markit’s CDX index) is still relatively small.
M&A, high yield update
Courtesy of Thomson Reuters:
The value of worldwide mergers and acquisitions totals $309.6 billion through year-to-date 2011, a 69% increase over last year at this time and the strongest start for M&A since 2000,
Shiny junk resists a funk
Moody’s has released its full-year 2010 default rates for high yield bonds and loans, and unsurprisingly the improvement over 2009 was impressive:
The global speculative-grade default rate finished 2010 at 3.1%,
Another milestone for junk debt
Courtesy of Reuters, a new milestone for junk debt issuance:
The volume of global high yield corporate debt topped $300 billion this week, shattering the all-time annual record for high yield bonds set in 2006 ($185.0 billion).
Junk bonds ride again
If it’s good enough for the Fed, then it’s good enough for legions of investors…
That would seem to be the message, at least, from one of the many interesting aspects of this week’s Federal Reserve data bonanza.
Desperately seeking income
In common with many investors, pension funds have a problem, which can be summed up in the following two graphics from UBS:
For a variety of reasons (two bear markets in a decade, the boom in liability driven investing and so on) pension funds and other institutional investors have slashed their weightings of equities and bulked up in bonds in the past quarter of a century.
Junk windfall
We’ve been keeping a watchful eye on this year’s junk debt bubble rally, if only because its implications could stretch well into the future.
It remains unclear whether investors have made a wise decision by going further out on the yield curve and snapping up speculative-grade bonds in near-record amounts.
All junk, all the time
Earlier in August, we looked at various reasons for why this year’s junk bond rally had been surprisingly persistent.
But how does this relate to the market for junk loans, better known as speculative-grade or leveraged loans?
On Friday,
And the junk bond rally sailed on
Why did junk bond issuance reach new heights last week? And why has it nearly reached an annual record high this year?
While yield-hungry investors are probably looking for anything they can get, it seems a few things have happened this year for the stars to have aligned so neatly for junk.
From junk bonds to junk mortgage bonds
If investors really ♥ junk for most of this year, they really really might ♥ mortgages.
It’s a point you might not have realised just by looking at non-agency residential mortgage-backed securities (RMBS) and high-yield bond indices over the past 13 months or so.
Whither corporate bond issuance?
“Forget the shorts”, as FT Alphaville noted on Friday. Company and financial bond issuance has virtually collapsed in Europe in recent weeks amid fears over the eurozone’s public debt problems and US financial reforms.
Risky like it’s 2007
Call it the madness of markets or the easing of credit crisis indicators.
But high-yield debt, better known as junk bonds, is now trading almost at par value.
From Forbes:
The riskiest class of corporate bond has inched close to par for the first time since 2007.
Investors really ♥ junk. We mean really.
When people talk of junk bond rallies (and they have been talking – a lot) what junk are they referring to exactly?
The standard index for high-yield bonds, or US corporate bonds rated below investment grade,
Is the party ending for junk junkies?
It wasn’t long ago that we posted this: “Junk bond junkies party on”. Now, investors are selling out of junk bonds at the fastest rate since September 2005, the FT reports on Monday, citing the sell-off as the latest indication that concerns over sovereign debt are hitting other credit markets.
Junk-bond junkies party on…
Junk (bonds, that is) are back in fashion, as Manchester Utd football club proved this week – and ShortView’s John Authers notes on Wednesday.
In the second week of this year, $11.7bn in high-yield offerings came to the market,
[Modern Football Finance] Debt double-Glazering
On sale today:
Issuer: MU Finance plc.
Sec Type: Senior Secured Notes Distribution: 144A and RegS (no Reg Rights)
Amount: £500,000,000 equiv.
The slumbering CLO awakes?
Earlier this month, FT Alphaville asked whether synthetic CLOs were gone for good, or merely hibernating?
This week it looks like the synthetic CLOs’ simpler cousin, your run-of-the-mill business loan-packed CLO,
Prepare for a junk-bond deluge in shipping
Central bank policy may have successfully pushed down Libor rates following the Lehman blow-out, but banks still appear rather reluctant to pass on those lowered costs to commercial and retail clients.