bonds high yield oil OPEC

HY Credit Has Worst Week Since February; Billionaires Lose $4.6 Billion

One theme I've been keen on highlighting this year is the growing divide between HY assets held in funds and the Street's willingness to inventory HY bonds. The problem is pretty straightforward. If outflows from HY bond funds exceed the amount of cash fund managers have on hand or otherwise exceed their capacity to tap bank lines of credit, they'll need to sell the underlying bonds. Unfortunately, the underlying bonds barely trade. The market is illiquid. Given that, managers will need to offer the paper they hold at firesale prices in order to meet redemption requests. The situation is so tenuous that even Virtu, the HFT firm that literally never loses money - won't touch HY credit. To be sure, I'm surprised that we've gone as long as we have without a complete HY meltdown (I'd imagine Riyadh is equally incredulous). Although the door seems to be closing slowly, lowly US energy producers have managed to stay afloat by tapping bond markets and secondaries. Some of these are basically zombie companies and just as soon as crude hits $50, they start pumping again, which ironically guarantees the supply glut will persist. Now, beleaguered HY names face a fresh set of challenges em
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