Wednesday, 16 December 2015

Stocks, junk bond funds rally

Markets rallied on Tuesday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 jumped 2.6 percent.

Oil rose. West Texas Intermediate crude jumped 2.9 percent while Brent crude gained 1.4 percent.

US Treasuries and German bonds fell but junk-bond funds rallied. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF and SPDR Barclays High Yield Bond ETF both advanced for the first time in four days.

The risk premium on the Markit CDX North American High Yield Index narrowed the most since October.

Views on the outlook for high-yield debt are mixed. From Bloomberg:

Jim Reid, a strategist at Deutsche Bank AG, wrote Monday that this month’s turmoil, including Third Avenue Management’s suspension of cash redemptions from a mutual fund that invested in high-yield debt, may be a harbinger of things to come. Berwyn Income Fund’s George Cipolloni said the similarities between markets now and those before the financial crisis are too big to ignore...

“I don’t see any systemic risks out of this,” said Fred Cannon, a KBW Inc. bank analyst...

Five years after the Dodd-Frank Act, banks are better-capitalized and have smaller inventories of thinly traded debt, and the firms wouldn’t be materially affected by any contagion from declines in high-yield bonds, according to market participants.

No comments:

Post a comment