It is lunacy to try calling market bottom

ON BONDS

As summer gives way to autumn, there seems to be no let-up for the high yield bond market as investors continue to jump ship after suffering exogenous shock after exogenous shock.

Concerns about the stalling economic recovery, the failure of traditional policy tools to deal with the sovereign debt contagion and banking problems in Europe, as well as the US debt downgrade, have caused investors to indiscriminately reduce their exposure to high yield bonds. Issuance has almost ground to a halt at the riskier end of the credit spectrum, where investors have showed the most hostility and where borrowers have faced the biggest constraints. Re-pricing has been evident, with the spread over government bonds on the average high yield bond rising sharply from 528 bps at...