Bringing you live news and features since 2006 

bubble

Corporate high yield not yet at “bubble” levels, says Market Vectors’ Rodilosso

RELATED TOPICS​

Sentiment in the media and in many corners of the marketplace that holds that high-yield corporate debt is in “bubble” territory may be missing some key factors currently shaping the bond landscape, according to Fran Rodilosso, fixed income portfolio manager at Market Vectors ETFs.

“I think there is a difference so far between what we are seeing at the beginning of 2013 and the type of credit bubbles we have seen historically,” says Rodilosso. “A bubble is built on excessive leverage, and modern bubbles have been fuelled by leveraged buyouts, real estate speculation, and structured products with a high degree of embedded leverage.”

“No doubt some of these phenomena are creeping back into the market, and leverage at the company level, to generalise, did start rising during the latter part of 2012,” he adds. “But whereas during a more ‘classic’ bubble a vast majority of debt issuance has historically funded takeovers, dividends, and massive capital spending, 2012’s record issuance was still, for the most part, done for the purpose of refinancing. That refinancing was done at lower interest rates, reducing the cost of debt for many borrowers, while also reducing the amount to be paid back over the next two years.

“Yields have been pushed down by a highly aggressive central bank policy, with the result that yield-oriented investors have been pushed into owning lower-rated credits. As a result, the yields on riskier debt are as low as they have ever been. But the credit spreads, the difference between the yield on a high yield bond and a Treasury security, are actually closer to their historic average.”

The etfexpress Awards 2013 for the top ETF product and service providers will be held in London towards the end of Q1 2013. Please click here to nominate your product/firm.

Latest News

Morningstar has published a review of the European ETF market for the first quarter 2024, which finds that it gathered..
ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..
Calastone has published an ETF white paper which examines several of the processes that take place across the lifecycle of..
Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry..

Related Articles

Kristen Mierzwa, FTSE Russell
Index Investments Group (IIG), a division within index provider FTSE Russell, has extended its range of indices through two new...
ETFs
US ETF issuers of active ETFs are facing an increase in fees from the big custodian firms, such as Charles...
Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by