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high yield

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Mini Bonds – who is buying them?

One of the many unintended consequences of structurally low interest rates over the past few years has been the emergence of mini-bonds in the UK. These are typically non-tradable debt instruments issued by companies directly to individual investors*. We’ve commented before on one such bond issued by Chilango, a London based vendor of Mexican food, and highlighted some of the risks relative to …

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Ten reasons to like US high yield today

Global growth concerns, fears of a less accommodative Fed, and limited high yield market liquidity coupled with complacent and crowded investor positioning has served to reprice the US high yield market over the past few months. Following on from the worst quarterly performance in Q3 2014 for some three years, the US high yield market arguably now offers a significantly more attractive entry po…

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A tool for a rising rate environment: high yield floating rate notes

We are entering a new era for interest rates in the developed world. The extended period of ever looser monetary policy is starting to draw to a close. In the wake of the tapering of quantitative easing (QE) from the Federal Reserve (Fed), investors now expect to see the first interest rate hikes in many years, initially in the UK and shortly afterwards in the US. The principal focus of the deb…

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Burrito Bonds – an example of the retail bond market

One of our local burrito vendors has been advertising a new 8% bond to its customer base. The company, Chilango, wants to raise up to £3m to fund expansion of its chain in central London. This will be done via a crowd sourced retail offering that’s already drawn some interesting coverage in the financial press. Having performed some extensive due diligence on the company’s products as a team, w…

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Respect Your Seniors – TXU Default Case Study

On 29th April, Energy Future Holdings Corp (the energy business formerly known as TXU) filed for Chapt 11 bankruptcy, listing $49.7bn in debt liabilities. This came after several months of back and forth negotiations between various creditors and the owners of the business. As such the filing was widely expected and the market had been pricing this in.

One thing that was quite an eye-opener, ho…

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Video – Some thoughts on U.S. credit from our American research trip

A few of the M&G bond team recently visited New York and Chicago on a research trip. We put together a short video to share some of our thoughts regarding US credit markets. A particular focus is the U.S. high yield market where we highlight some sector themes. We also consider the potential impact on U.S. credit spreads when the Fed starts to raise interest rates.

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Stand up for your rights! Covenant erosion in high yield bond documentation

2013 saw a record year for new issue volumes in the European high yield market. A total of $106bn equivalent was raised by non-investment grade companies according to data from Moodys. Whilst this is beneficial for the long term diversification and growth of the market, there have been some negative trends. Given the intense demand for new issues, companies and their advisors have been able to …

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High yield: bullish or blinkered?

I recently attended JP Morgan’s annual US high yield conference. It’s one of the best conferences around: well attended, and with more than 150 companies, panel discussions and specialist presentations. As such, the topics covered give a good flavour of the market’s latest thinking.

Unsurprisingly, many of the well-rehearsed arguments in favour of high yield resurfaced once again, with presenta…

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Tomlins’ guide for getting the best from High Yield in 2014

2013 was another decent year for returns in the high yield market. The US market returned 7.4%, with Europe a little way ahead at 10.3%. Bonds saw solid income returns, low default rates and a small capital gain as a tightening in credit spreads was enough to overcome weakness in the government bond markets. Once again this illustrated how high yield can be one of the few fixed income asset cla…

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A vintage year for high yield issuance?

Much like fine wines, we believe that the year in which a bond is issued is an important factor in shaping its inherent character. The right climate in the markets, like the right weather conditions in the Gironde, can influence the nature of a security for better or for worse. 2013 is already a record year for the new high yield issuance in Europe (see the chart below). But will 2013 be one of…

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