'Dirty elements' of last great credit bubble return to worry HY buyers

A new wave of outperformance for high yield debt plus a return to financing strategies seen pre-crisis have begun to alarm bond fund managers.

Although many remain optimistic on the sector given a backdrop of record low interest rates that remain on hold, some investors are casting a worried eye over recent developments. Schroders’ US fixed income team acknowledged another strong year for high yield – benchmark global indices rose 8% last year – has brought with it fresh concerns. “Signs of late cycle credit risks are beginning to appear, and we are monitoring the pace of the trend in aggressive issuance,” they said. The team’s Neil Sutherland said there is “early evidence of more aggressive leverage”, specifically levera...