By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
IndebtaIndebta
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
IndebtaIndebta
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
Indebta > News > Investors predict ‘imminent’ US high-yield bond sell off
News

Investors predict ‘imminent’ US high-yield bond sell off

News Room
Last updated: 2023/05/13 at 1:22 PM
By News Room
Share
4 Min Read
SHARE

Investors are growing nervous of a sharp fall in the prices of risky corporate bonds as credit conditions for US businesses and households grow increasingly tighter.

The US Federal Reserve’s quarterly Senior Loan Officer Opinion Survey this week showed that 46 per cent of US banks plan to raise their lending standards due to worries about loan losses and deposit flight.

In the past, tighter lending standards have led to the spread, or gap, between yields for riskier corporate bonds and ultra-safe government bonds widening, because credit becomes riskier to own.

But while lending has not evaporated as feared following the collapse of Silicon Valley Bank in March, the spread between higher-yield bonds and Treasuries has stayed relatively tight, leaving investors speculating that a correction is coming.

“In terms of why corporate bond spreads have not yet moved, I think it is simply because lending standards are a lead indicator on the real economy,” said Mike Riddell, a bond fund manager at Allianz Global Investors.

“We think that global risk premia will move sharply higher once the exceptionally tight lending standards begin to have a major impact on global growth, which is due to happen imminently.”

Ultimately, he said, it takes at least a year for a change in interest rates to have the full impact on the economy. The Fed started raising rates in March last year.

Investors’ worries over the health of the US banking system are still rippling through markets, more than two months since the failure of SVB. PacWest shares have lost more than a fifth in value this week after the bank announced it lost almost a tenth of its deposits in the first week of May. The KBW regional banks index, which tracks midsized and local US banks, has shed 35 per cent since the start of the year.

“The failures of several banks in recent months have been relatively well contained, and a 2008-style crisis looks much less likely than it did when Silicon Valley Bank collapsed in March,” said Eugene Philalithis, head of multi-asset investments at Fidelity. “However, the US banking sector remains in a slow-motion crunch.”

Fidelity believes high-yield US bonds look particularly vulnerable to tighter lending. Spreads are at levels consistent with a “more benign outlook than reality suggests”, according to Philalithis, who is buying highly rated sovereign bonds and avoiding risky credit.

Howard Cunningham, fixed income portfolio manager at Newton Investment Management, has said he has also “sharply reduced” exposure to high-yield bonds because “where lending standards go junk bond yields will follow”.

In its financial stability report earlier this week, the Fed cited the chance of a credit crunch among the biggest current risks to the financial system but not the Fed’s most likely scenario.

Read the full article here

News Room May 13, 2023 May 13, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
What a trillion-dollar defense budget really means for veterans

Watch full video on YouTube

The New Soap Operas Are Just 2 Minutes Long — The Power Of Micro Dramas

Watch full video on YouTube

Microsoft poaches top Google DeepMind staff in AI talent war

Stay informed with free updatesSimply sign up to the Artificial intelligence myFT…

Most Americans can’t answer basic retirement questions: Survey

Watch full video on YouTube

How Airbus beat Boeing to become the world’s biggest plane maker

Watch full video on YouTube

- Advertisement -
Ad imageAd image

You Might Also Like

News

Microsoft poaches top Google DeepMind staff in AI talent war

By News Room
News

White Brook Capital Partners Q2 2025 Commentary

By News Room
News

EU must strengthen Asian security ties despite US pressure, says Kaja Kallas

By News Room
News

US embassy in China warns exit bans risk straining bilateral relations

By News Room
News

Client Challenge

By News Room
News

Donald Trump’s escalating attacks on Federal Reserve unnerve investors

By News Room
News

Spain overtakes Germany as top EU asylum destination

By News Room
News

Brussels stalls probe into Elon Musk’s X amid US trade talks

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?