How much has risk appetite rebounded in the U.S. capital markets of late? LCD's Marty Fridson sums it up nicely, focusing, as he does, on a particular asset class.
"The high-yield bond market had a pretty good year over the past month. From a low point on Feb. 11, when it stood at 867 bps, the BofA Merrill Lynch US High Yield Index’s option-adjusted spread (OAS) tightened to 682 bps on March 11. In that span, the index’s total return was 8.08%.
"To put the high-yield market’s month-long performance in perspective, the mean return for all full calendar years since the index’s inception is 9.09%. If the Feb. 11 to March 11 period were a calendar month, it would rank third in total return among all months of the BAML High Yield Index’s history. The 8.08% return annualizes to an astounding 165.75%."
Of course, one month does not a year make, and, as Fridson points out in his analysis, realizing the type of gain detailed above means that an investor would have had to accept the full risk of owning the full high yield universe.
That would include a host of names in the ailing energy and commodities industries, whose performance (and spreads) over the past few quarters were more indicative of a distressed debt portfolio, as opposed to high yield proper.
This story first appeared on www.lcdcomps.com, LCD's subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.
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