Jonathan Butler, head of European leveraged finance at PGIM Fixed Income, also pointed out that the relatively weak U.S. corporate earnings combined with a couple of problems among European companies have compounded the market weakness. Meanwhile, investors have grown more mindful of the recent run up in high yield bonds.
The pullback, though, may have opened an opportunity for those whom believed that it was only a short-term event. BAML strategists highlighted that high-yield bond outflows hit $25 billion during the market downturn of late 2015 and early 2016. For outflows to continue to rise, markets would have to see that a larger share of issuers is in danger of defaulting, and there is no such signs yet.
“[Credit] fundamentals are still very good,” Peter Aspbury, a portfolio manager at J.P. Morgan Asset Management, told WSJ. “Our concern is more around the (market’s) mentality over the next few weeks. Very often these idiosyncratic situations are enough to spook investors.”
For more information on speculative-debt markets, visit our junk bonds category.