Fixed Income  

High-yield issuance set for record 2014

The Candriam Investors Group’s deputy head of high yield and credit arbitrage said the number of high yield bond issuers from emerging markets, Italy, Spain and non-core European countries, such as Portugal, Greece and Ireland, is growing with high yield issuance expected to reach record levels of €110bn (£90.5bn) in 2014.

He said: “With the end of cheap money approaching, investors now face two major concerns that need to be addressed: the impact of rising interest rates on investment portfolios, and how to find attractively priced yield.

“Investors must, therefore, change their fixed income investment decision-making process to address these new challenges.”

Mr Zeenni’s comments came as his firm published a 10-page white paper, The End of Cheap Money?, which argued that corporate issuers are now healthy, while “fallen angels”, assets that suffered downgrades, are also in better shape.

The paper referred to Moody’s data showing high yield corporate issuances from the Europe’s periphery countries doubled to $24bn (£14.3bn) in 2013, increasing to 27 per cent of total issuances from the European Union, up from 18 per cent in 2012.

It said: “This is a surprising yet positive sign for the asset class, proving its value and investment attributes.”

Adviser view

Mark Dampier, head of research at Bristol-based Hargreaves Lansdown, said: “At an index level, high yield bonds are at a record low and investors aren’t being paid to take the risk. Fallen angels may be in better shape, but they still present risk.

“I don’t think people should go in lock, stock and barrel - they should look at strategic bond funds where the manager has more discretion on where the money goes and can reverse out if needs be. This isn’t bargain basement territory yet - not after five years of low interest rates.”