How will liquidity withdrawal impact global high yield bonds?

HIGH YIELD BONDS

Andrew Lake, head of high yield at Mirabaud Asset Management, assesses if the high yield bond sector has become more susceptible to short-term market moves.

The recent volatility in the US 10-year treasury over the last three months – moving from 1.63% to 2.74% and settling around 2.55% – and the knock-on effect on both gilt and bund yields (see chart 1 below) raised fears we were somehow going to repeat 1994 and experience another high yield market collapse as a result of rapidly rising interest rates. In fact, the situation is rather different today. It is, however, the central bank interventions which for better or worse are impacting the way high yield bonds behave at this point in the cycle. The question remains whether high yield wi...