The iShares Global ex USD High Yield Corporate Bond Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses of the Markit iBoxx Global Developed Markets ex-US High Yield Index.
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February's 1.6% is off from an already-low 1.9% in January, but Moody's see it rising to 2.3% by year's end. The historical average since 1983 is 4.7%. Globally, the default rate fell to 2.4% in February from 2.6% previously, and Moody's sees a further decline this year to 2.1%.
The default rate better stay low - the junk market yields just 5.34% on average and the spread to Treasurys is 379 basis points per the BAML benchmark index, right near a post-crisis low.
U.K. inflation has fallen below the Bank of England's target of 2% for the first time since November 2009, dropping to 1.9% on year in January from 2% in December and undershooting consensus that was also 2%.
On month, CPI exhibited deflationary tendencies, declining 0.6% vs a rise of 0.4% previously and consensus of -0.5%.
Core CPI +1.6% on year vs +1.7% and +1.9%.
The fall in inflation was due to lower prices for recreational goods & services, furniture & household goods and alcoholic beverages & tobacco. These factors were partially offset by increases for miscellaneous goods and services. (PR)
Factory output prices (PPI) fell 0.3% on month vs flat and +0.1%. (PR)
The pound slides vs the dollar and is -0.3% at $1.6664, while the FTSE 100 is -0.2%.
Beginning in 2016, Fridson sees the high-yield default rate averaging 8.4% over the following four years - this compares to the long-run average of 4.5% and the current rate of just 2.5%. Putting those numbers in perspective, it means the number of issuers defaulting will be triple that during the 2008-09 crisis, and double the number defaulting in the 5-year surge beginning in 1999.
For those who have bid up junk bond prices to an average of 103.2 cents on the dollar, the average yield down to 5.8%, and remain focused on interest rate risk instead of credit risk ... you've been warned.
Simon Property Group (SPG) is the latest in a string of issuers raising money in European debt markets as the yield discount to U.S. paper nears its widest in 4.5 years. Simon is selling €750M of seven-year notes yielding 75 bps over swaps, about 122 bps better than it could get in the States.
Behind the widening is monetary policy - the Fed is making noises about pulling back from stimulus, while the ECB isn't yet close to that point.
More from Gundlach: Bond indexing has been a wonderful strategy for many years, but now the well-followed indexes (BND, AGG) have too short of a duration and are overloaded with Treasurys. The value is in non-traditional sectors like emerging markets (EMB), non-agency MBS, bank loans (BKLN), and global high yield (GHYG).
Focused on what ECB action may be on sovereign debt, markets are underpricing the chance the central bank steps into corporate bonds, opine two Goldman strategists. Measures could include direct purchases of corporate paper or a "funding for lending" scheme (a la the BOE). The moves would allow the ECB to provide market support without violating its mandate against financing of governments.
European high-yield investors don't know from troubles there, ahead by 12% YTD with stocks in the tank, writes James Tomlins. He believes a world of microscopic rates, slow growth, and deleveraging has altered correlations, allowing high-yield to perform even as returns to shareholders lag.
When life deals you lemons ... banks (particularly European ones) cutting back lending activity in Asia is leading to a ramp in the development of the corporate bond market there. Companies (ex-Japan) issued $398B in bonds last year, up 29% Y/Y as syndicated bank loans dove 44%.
A new offering of ETFs offers high yield investors greater international - both developed and emerging - exposure. EMHY is designed to track the Morningstar Emerging High Yield Bond Index, the HYXU sticks to developed countries, and the GHYG adds international (developed) exposure to the popular HYG. (PR)