european high yield spreads

4/27/2022. In conjunction with higher volumes of B B issuances, 2019 also saw improved investor returns . The global spread of the coronavirus affected the full spectrum of EMEA HY credit markets. That, too, suggests European high yield spreads should widen, relative to U.S. ones. A common statistic used to support this notion is that credit spreads for the asset class are trading well through long-run averages. European high yield spread could widen 50 basis points next year to deliver a total return of 1 percent, JPMorgan strategist Daniel Lamy wrote in a research note. With little net change in yields, almost all of this has come from income. Indeed, 2020 has recorded the second largest full-year volume since LCD's records began in 2006, with three months registering volumes of €13 billion or more — a feat not previously witnessed in the market during a calendar year. European leveraged finance issuance (leveraged loans and high yield bonds) increased to € 41.9 billion in 1Q'19, a 19.0% increase from €35.2 billion in 48Q'1 but a 53.8% decrease from €90.6 billion in Q'18. Low yields mean higher prices and HY is now . Jose Aguilar, Head of European High Yield Bonds at BlackRock "The BGF European High Yield Bonds Fund 's objective is to deliver attractive risk-adjusted returns for its clients." The average bid-ask spreads for HY Eurobonds hit a high for 2022 on the week of 10 April, spiking nearly two basis points, to just below 12 basis points. Head, European High Yield 2021 Market Outlook Seeking Value in European High Yield At a glance, European high yield looks, at best, fairly valued and at worst, expensive. The option-adjusted spread on high-yield securities has fallen, using the Bloomberg Barclays U.S. Corporate High Yield Bond index as a proxy. In contrast to comparatively stable levels in the US., PIMCO strategists flag that European HY spreads have nearly doubled since October 2017 (see chart). One final reason to be comfortable with the switch from BBs to Bs is the default rate expectations. Yield spread is measured in basis points. Presently, the spread of B-rated corporates . In fact, 44% of new issuance in Europe for November 2021 was in ESG structures. "We think loan prices will remain relatively stable during 2018 and that the asset class will see another coupon year, which equates to a 3.5 percent return," Lamy said. September saw US high yield (HY) bonds, as represented by the Markit iBoxx $ Liquid High Yield index, return -3.05%, the worst month since August 2011. Thirdly, while high yield is still often referred to as "junk", 70% of the European market is comprised of BB-rated bonds, the higher quality end of the non-investment grade spectrum. ISIN LU0596125814 A direct comparison of quality spreads between the two regions mainly demonstrates that Europe's high-yield universe is less risky. • European high yield bond spreads are attractive when compared to other fixed income assets • Default rates are low and are generally expected to remain low for the next 12 to 18 months • The size of the high yield bond market has steadily increased over the past The default rate in European high-yield now stands at 0.4% and we expect it to stay below 1% over the next 12 to 24 months. The ICE BofA Option-Adjusted Spreads (OASs) are the calculated spreads between a computed OAS index of all bonds in a given rating category and a spot Treasury curve. With European high yield (HY) spreads nearing two-year highs, investors are taking notice. So the premium of spreads enjoyed by B-rated bonds over BBs should not be reduced by loss of capital on default. The fund is categorised as Article 8 under Sustainable Finance Disclosure Regulation (SFDR). "The spread between corporate/high-yield bonds and the relevant sovereigns have been falling at the same time that sovereign bonds yields have hit historical lows," observes Matthew Yeates . Furthermore, the most important macro driver for the European market remains US high-yield spreads, which continue to move in line with oil prices.. Because the high-yield issuers te nd to be smaller companies, high -yield bond spreads show a stronger inverse correlation with the Russell 2000 compared with the overall U.S. equity market. High yield issuance for refinancing and/or repayment of debt in developed market Europe decreased to €11.8 billion, representing 42.8% of all issuance in 1Q'17, up from €4.6 billion (45.4% of total) in 4Q'16 and from €1.3 billion (14.1% of total) in 1Q'16. European Government Bonds. Apollo Throws Struggling Carvana $1.6 Billion Junk-Bond Lifeline. In the year to Feb . Comparing European high yield (HY) and investment grade (IG) corporate bond data from MarketAxess, the pressure for traders and investors in high yield markets is very apparent, set against investment grade (IG). High-yield bond activity in Europe was remarkably strong this year, given the backdrop of a global pandemic for the last 10 months. The fund's objective is to provide long-term capital growth. There have been a few key things to call out: To the end of October, the total return of the index was 3.1%. Chart 1: Global High Yield Index (HW00) spread performance All currency sub-index spreads widened by at least 80% MoM, with the CAD spread more than doubling. All bonds in this comparison have long durations, making the main differentiator the underlying credit risk. Basic Info Euro High Yield Index Option-Adjusted Spread is at 4.31%, compared to 4.09% the previous market day and 3.00% last year. European High Yield & Leveraged Loan Report Page 6 "Primary high yield issuance totaled €19.1 billion on 48 deals in 3Q'17" 2017, which was an in in Issuance: High Yield Bonds Primary high yield issuance in 3Q'17 totaled €19.1 billion on 48 deals, a 44.5% decrease from 2Q'17 (€34.4 billion on 83 leveraged loan market and high yield bond market, witha very significant percentage (possibly up to around half) of all large cap, syndicated leveraged senior facilities agreements in Europe in 2019 potentially qualifying as so-called "high yield bonds in disguise". Should economic growth meaningfully weaken . As a result, and for the first time in over five years, high yield spreads are wider in Europe than in the U.S., despite their higher average credit . European high yield credit posted a negative return of 3% in euro terms, compared to a loss of 1.1% for their US high yield equivalents, while the FTSE Europe ex UK declined by 5.4%. Current HY levels were last observed in the eurozone crisis years of 2011-2012. The company was founded in 2004 in Lyon, France. Investors use the yield spread to measure the relative value of two different securities, particularly as it pertains to credit quality but also to liquidity and supply, which can influence bond prices and yields. 2:55 AM. "US high-yield is at 370bp and European high-yield at 320bp. The historical price pattern suggests that the . We assume that defaults will be less severe in Europe owing to the low number of issuers from the energy sector in Europe relative to the US. This Fund was reconstructed in December 1998. 4/27/2022. We target consistent high income, investing in both existing and new issues. A high-yield bond spread, also known as a credit spread, is the difference in the yield on high-yield bonds and a benchmark bond measure, such as investment-grade or Treasury bonds. After lying dormant for almost two years, the market has seen a flurry of activity, with a record €17.3 billion of issuance in 2009 to date. While current spread levels register more as fair value, in light of the strong corporate fundamental picture, we think positioning in European corporate credit is warranted. The 2013 report introduced a technique for addressing the analytical challenge that Europe's high-yield market is much more heavily concentrated than its U.S. counterpart in BB issues. However, when you High yield has felt the full effects of this in recent weeks, as bond and loan spreads have widened past levels experienced during the European sovereign debt crisis (2011), the commodity crisis (2016) and the volatile period in the European Bond Spreads The European Bond Spread table below measures the yield spread against the German benchmark for key European countries. There have been many false dawns for the European high-yield bond market. T1his quarterly increase was driven solely by an increase in high yield bonds , issuance while issuance of leveraged loans declined. spread compression together with the European market's significa nt number of BB issuers . U.S. high-yield credit spreads were squeezed further on Wednesday, a day after hitting the tightest levels since January 2020, an indication of increased demand from investors for the riskiest . In this article we will look at the Top 5 High Yield Bonds with insights from Bonds BlackRock, Schroders, Nordea, BlueBay, and Neuberger Berman. The yield on a Treasury bill represents the return an . Defaults may rise: As potentially higher costs weigh on profitability, Fitch Ratings predicts the trailing 12-month high-yield default rate could rise to 1.5% by year-end 2022, from 0.75% at the. They find that high-yield bonds are almost twice as costly to trade as investment grade bonds. In addition, short duration European high yield compares favourably in terms of its breakeven (its tolerance for yield increases versus its starting yield . The low yields are certainly a problem for corporate bonds as well, but the spread more than compensates for the additional risk taken when moving into High Yield. We find a similar relation between the spreads on high-yield bonds and investment grade bonds in the European market. A research-driven, diversified portfolio of primarily European currency denominated high-yield corporate debt issued by below-investment-grade companies. If you are a European High Yield Online member interested in joining the HYIC send an email to contact@europeanhighyield.online with "HYIC" as the subject. While the war in Ukraine, high commodity prices, and rising inflation overall weighed on the market early in the month, several factors combined to lay the groundwork for a recovery. In 2020, EHY returned 2.8% with volatility of 15.6%, compared with the MSCI Europe's losses of -3.3% and volatility of 23.9%. In 2020's first quarter, the spread jumped from about . The recent spread widening in European high yield appears to have created a good buying opportunity for investors looking for income and total return. 4/27/2022. A very unusual year for returns in European high-yield bonds Thanks to those ingredients, European high-yield bonds have generated a return of 6.5% so far this year (to end October 2017), a little over twice that of European investment-grade bonds, but with only about two thirds of the volatility - see Exhibit 1 below. Through its Spread Research brand, EthiFinance is the leading independent credit research provider in Europe. Closing index values, return on investment and yields paid to investors compared with 52-week highs and lows for different types of bonds . Similarly, in European high yield, spreads widened to 483 bps and subsequently contracted by 96bps to 387bps. European HY yields have fallen to just above 3% which does not compensate well for potential risks. M. Christopher Garman 1. Leverage (net debt to earnings before interest, tax, depreciation and amortisation) is at about 3.5x, the lowest since 2017. HY-Cal is a calendar that users can add events to - results, events, meet ups and conferences. This is partly due to low yields on Government bonds; HY should offer a "spread" above the so-called risk-free rate, but this risk-free rate has turned negative in some cases, if not very low. European high-yield bonds (hedged to the euro) outperformed U.S. high-yield bonds in December by 0.63 percent. The rise came almost exclusively from credit spread tightening, largely a result of the trickle down in demand from the announcement of quantitative easing (QE) as credit investors move further down the ratings . The wheels could be coming off the high-yield bond market. The rating agency increased its expected rates and now expects the European speculative-grade trailing 12-month high yield default rate to reach 8.5% in March 2021, up from 2.4% on the same trailing basis in March of this year (and 2.7% at the end of April). That in turn will likely compress spreads in the European ESG-linked bond markets. Year-to-date, 'BB' average yields rose to 4.29% from 2.69% in March 2019; 'B' yields increased to 8.18% from 5.74%; and 'CCC' yields to 15.42% from 9.14%. From a risk-return perspective, EHY compare well with European equities. Because of these and other factors, high yield issuers have been able to The ICE BofAML European Currency Constrained high yield index: The index is designed to track the performance of euro- and British pound sterling-denominated below investment grade corporate debt publicly issued in the eurobond, sterling domestic or euro domestic markets by issuers around the world. Despite ample demand, European high-yield bond issuance slowed down in February, as 11 bonds priced totalling €3.9 billion, down from 17 bonds for €5.7 billion in January. This is lower than the long term average of 5.99%. The selection of these bonds is mainly based on fundamental analysis. frequency. Qualifying securities must have a below investment grade rating (based on an average of Moody's, S&P, and Fitch). 1. This could be the year when it finally shows its true potential. Yield spreads could tighten: Competition for assets has already caused yield spreads to shrink in the broadly syndicated loan market; this trend could extend to the middle market. For instance, whilst the spreads on European high-yield bonds and leveraged loans are largely correlated over the longer term, a closer observation of average spreads of similarly rated bonds and loans over the past several years reveals numerous pockets of substantial premiums and discounts that a well-resourced investor could have taken . US$-denominated high-yield bond issuance totaled $76 billion in the March compared with the $55 billion in February and $83 billion Comparing European high yield (HY) and investment grade (IG) corporate bond data from MarketAxess, the pressure for traders and investors in high yield markets is very apparent, set against investment grade (IG). Qualifying securities must have a below investment grade rating (based on an average of Moody's, S&P, and Fitch). (All data as of 5 April 2022). Thus, the lagging performance of the Russell 2000 helps to explain why the high- yield bond spread re mains well above its readings of late 2019 and early . FTSE Russell Factsheet | FTSE Pan-European High-Yield Bond Index | March 31, 2022 TOP 10 ISSUERS (By Market Weight) Description # of Issues Par Amount* Market Value* Market Weight (%) Average Coupon (%) Average Life (Years) Yield to Maturity (%) Effective Duration OAS (bps) TELECOM ITALIA SPA 15 13.41 13.39 2.91 3.32 5.95 3.53 4.50 316 Markus Allenspach, Head of Fixed Income Research, Julius Baer We see room for further spread compression in corporate and emerging market bonds, as the market focus shifts back from the Chinese epidemic to the consequences of sustained asset purchases by both the US Federal Reserve and the European Central Bank.We still recommend holding emerging market bonds, as well as BBB/BB rated corporate . percent on a total return basis in December 2015, as spreads widened by 57 basis points to 560 basis points. Carvana Revamps $3.3 Billion Junk Bond in Effort to Lure Buyers. Credit spreads in the U.S. high-yield corporate bond market have been diving to near 2018 post-recession lows, a sign of how deep the hunt for yield has become during the pandemic. Original inception: May 1997. Historical Data View and export this data back to 1997. Concentration in the auto industry reflects the size of the balance sheets of European car manufacturers such as Fiat Chrysler Auto, Renault SA and Peugeot SA, which are currently . "Investors can implement the trade on a one-for-one basis before FX hedge but can also decide . The credit spreads tend to widen in economic recessions and indicate an increased risk of default as well as reduced liquidity in the market. This data represents the effective yield of the ICE BofA Euro High Yield Index tracks the performance of Euro denominated below investment grade corporate debt publicly issued in the euro domestic or eurobond markets. However, the. The TTM high-yield bond default rate was 0.7% at end-2021, down from 3.3% in 2020. We expect this dynamism will attract more capital into European fixed-income markets in 2022. The fund invests in corporate bonds with a sub-investment grade rating, issued primarily by issuers from developed markets (Europe/US). European high yield has started the year strongly, with the Bank of America Merrill Lynch European Currency High Yield Index up 3.1% in euro terms in the first two months of the year. Keeping track of High Yield Reporting is easier said than done. The yield spread is the difference in yield between two different bonds. Our team of experienced analysts provide fundamental research services and investment recommendations in high-yield, cross-over and convertible bond markets for many clients including . If you look back to 1983, when spreads started at 370bp and you look on a 12-months basis, 70% of the time spreads were wider over a . The Blended Index performance shown is calculated using the ML European Currency Constrained High Yield Index from inception through 31 March 2009 and the ICE BofA ML European Currency High Yield 3% Constrained Ex-Sub Financials Index thereafter. It was a similar story in the European HY market, as represented by the Markit iBoxx EUR Liquid High Yield index, which shed 2.5% last month on a total return basis. European high-yield bonds are unique, and the dynamics of the European speculative-grade market are different from those in the United States. Yields are calculated from executable best bid prices from the MTS Cash market. This section of the market . The ICE BofA European Currency High Yield Constrained Index (HPC0) lost -0.11% in March and is down -4.67% YTD in local currency terms. Stats These charts display the yield spreads between Corporate Bonds, Treasury Bonds, and Mortgages. Given that high-yield bonds are riskier, this The short duration part of the European high yield market also has a lower spread duration (1.9 years versus 4.0) and hence less price sensitivity to spread widening in most circumstances. As the full impact of the COVID-19 pandemic came into view the Global High Yield Index spread widened 400bp to move above the 1,000bp for the first time since mid-2009. This data represents the Option-Adjusted Spread (OAS) of the ICE BofA Euro High Yield Index tracks the performance of Euro denominated below investment grade corporate debt publicly issued in the euro domestic or eurobond markets. Tracking Bond Benchmarks Wednesday, April 27, 2022. Technicals high-yield spread was 3.6 times the average investment grade (IG) spread. Robeco High Yield Bonds is an actively managed fund that invests in high yield corporate bonds. Upgrade now. In the last two weeks of July, European high-yield debt returned 0.84%, whereas U.S. high-yield debt lost 0.4%, Robert Smith for Reuters reports.. U.S. junk bond mutual funds experienced $1 . Photographer: E. Bacon/Topical Press . Widening spreads: The ICE BofA Euro High Yield index's option-adjusted spread was 425 basis points as of March 23, up about 120 bps since September. This trend was echoed in the US market where a ccording to the S&P US Issued High Yield Corporate Bond Index, returns for By the end of the year that HY/IG spread ratio had risen to 4.1 times. High-yield bond sales are a shadow of what they were in 2018, and ECB policy is partly to blame. This quarterly increase was driven mainly by an increase in high yield bond issuance. An OAS index is constructed using each constituent bond's OAS, weighted by market capitalization. Debt-servicing costs in Europe could increase: If interest rates increase, borrowers with floating-rate liabilities might struggle to service their debts, though . TTM European leveraged loan default rates fell to 2.0% at end-2021, down from 3.7% at end-2020. In emerging market Europe, no high yield Current data on European government bond yields, including the yield, daily high, low and change% for each bond. Current estimates have put the default rate for European high-yield at 5-9% for 2020, followed by a rapid decline in defaults. Hot Start for High-Yield High-yield corporate bond issuance had a strong start to the year, due to growing expectations for the U.S. economy to take off coupled with tight credit spreads and less perceived credit risk. Legacy pandemic-related defaulted names transitioning off the TTM rate are unlikely to be replaced by new defaults until 2Q22 at the earliest. By looking at the influences that affect high-yield new issue pricing in this market, the author intends to clarify these differences. Just last month Europe high-yield borrowers were forced to pay eye-watering premiums to get their deals over the line as they grappled with the overhang of the fourth quarter's volatility. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €61.9 billion in proceeds in 4Q'20, a 13.3% increase from €54.2 billion in 3Q'20 and a 28.2% decrease from €82.2 billion in 4Q'19. The European high yield market, represented by the ICE BofA European Currency High Yield Index, has delivered a modest positive return so far this year. These weaker linkages, the severe initial Covid Lockdown impact on the UK economy in 2020, and the omission of high-yield credit from the BoE's QE program may explain the initial credit spread widening in 2020 in the sterling HY index, versus the Euro high-yield index, shown in Chart 3, even if UK credit spreads have subsequently tightened in . The average bid-ask spreads for HY Eurobonds hit a high for 2022 on the week of 10 April, spiking nearly two basis points, to just below 12 basis points. The 2015 year-end total return for European bonds was 1.36 percent, outperforming U.S. high-yield bonds by 6.00 percent. The European high-yield market is dominated by the automotive and telecom industries representing 19% and 16% respectively of volumes in the 12 months to June 2015. We believe that listed corporate credit still looks attractive at these spreads and particularly the spreads in European High Yield bonds. 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