The Barclays US Corporate High Yield Index has now closed at a yield of 4.97%, the lowest in the index's 30-year history, Reuters reports. (TR) For the week ending May 8, $789M of new money flowed into high yield. Here are some quotes that should scare everyone:
... There was "indiscriminate" buying in the high-yield primary market... CCC+ rated payment-in-kind toggle offerings (are getting done)... XM Radio launched a single tranche US$500M seven-year non-call three senior note offering partly intended for share repurchases... there's nothing you can buy in the secondary market right now, it's all bid... high-yield bonds have become as sensitive to rising rates as high-grade bonds, because there is no spread cushion left.
When PIK bonds are back you know we have entered the land of the lotus eaters. I'm afraid many investors needing income will be taking large haircuts when Odysseus comes to drag them away.