Don’t Look Now, But Junk Bond Spreads Just Blew Out The Most In 12 Years

It goes without saying that high yield had a rough go of it during Monday’s epic risk asset rout – junk doesn’t tend to hold up well under that kind of pressure.

Indeed, everyone’s favorite liquidity-mismatched, mom-and-pop high yield product suffered a grievous blow, falling 1% for one of the worst single sessions in years.

It was the fourth consecutive daily loss and you should note that Monday’s slide was considerably more painful than any of December’s down days.

But the real shocker comes when you have a look at high yield spreads.

Specifically, Monday appears to have been the worst day for junk bonds in 12 years, depending on how you conceptualize things. The 40-point widening was the biggest move in percentage terms since the summer of 2007, on Bloomberg’s index.

(Bloomberg)

On a simple, net basis, it was the second-largest single-session widening since the crisis years, eclipsing even the worst days in early 2016 when oil prices were busy collapsing amid a deflationary spiral triggered seven months previous by – you guessed it – the last yuan devaluation.

Spreads on Single Bs and CCCs widened by 43 and 42 bps, respectively.

One wonders if that was good news for David Einhorn’s short high yield position unveiled late last month.

Read more: Einhorn Takes On The US Corporate Debt Bubble

 

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