High-yield chart of the day
Bespoke Investment Group serves up this chart:
It seems as though while the high-grade bond market has responded to increased demand with massive amounts of new issuance, the high-yield market — which is still pretty much closed to new issuance — has responded with lower spreads. That’s a much healthier response: it means that writers of credit protection might have now emerged from technical insolvency, while total leverage continues to fall as debts are paid down and little new debt is issued.
High-yield markets were always going to take a while to come back in vogue, after blowing up twice (the first blow-up was the implosion of Drexel in the late 1980s). But the fact that there’s still demand for these instruments, as indicated by the chart, just goes to show how short memories are in this market.