Fixed Income  

High yield becoming more globalised

High yield bonds are becoming more common worldwide, opening up new opportunities to fixed income investors, according to Hermes.

Fraser Lundie, senior credit portfolio manager at asset manager, said at a press briefing that the bond type is becoming more common worldwide.

Globalisation of high yield will “change the way people think about the sector”, he said.

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According to data from the Bank of America Merrill Lynch Global High Yield index, in 1998, 89 per cent of high yield debt was issued in the United States, along with 3 per cent issues in Europe and 8 per cent in the rest of the world.

Today, the allocation is 57 per cent in the US, 27 per cent in Europe and 16 per cent in the rest of the world.

Mr Lundie said that high yield issuance is growing faster in Europe and emerging markets than ever before, with the US market already mature and often comprising repeat issues.

He added that, in a few years’ time, high yield bond funds that are constrained to a 25-30 bond mandate will look “old school”.