“In a world where your 10-year is pushing 3 percent, it’s hard to have high-yield trading at 5.5″ percent, Randall Parrish, senior portfolio manager at Voya Investment Management LLC, told Bloomberg. “It’s not like we’re afraid of credit – spreads aren’t really going wider.”
With yields on more conservative debt going up, traders view the yields on junk debt less as less attractive in comparison relative to the risk exposure. For instance, HYG shows a 5.15% 30-day SEC yield and JNK has a 5.26% 30-day SEC yield.
“The tailwinds we’ve had in the last few years, in terms of mutual-fund inflows, in terms of central bank support, in terms of generous valuations, we do think that a lot of those are fading,” Neil Sutherland, a portfolio manager at Schroders, told Bloomberg. “We would be a lot less optimistic on credit products than we have been over the last three or four years.”
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