High yield fund managers turn cautious after Phones 4u debacle

The collapse of Phones 4u has acted as a ‘wake-up call' for high yield bond investors, impacting prices just as indices begin to recover from the summer sell-off.

A high-profile slump in high yield took place at the end of July: the JPM European High Yield Bond index, for example, saw yields spike from 3.8% in June to 4.8% by 8 August, with US junk bonds seeing yields climb further. The drops resulted in a pause in issuance in August, helping yields drop back to lower levels, but bond managers are now urging caution once again in the aftermath of a painful example of credit-specific risk. Phones 4u's 10% payment-in-kind notes  -subordinated debt that is riskier than conventional bonds - lost virtually all of their value between the company's 1 ...