Demand for high yield remains strong

Last week, Vivendi Universal successfully raised finance to the tune of e1.35bn. In itself this is n...

Last week, Vivendi Universal successfully raised finance to the tune of e1.35bn. In itself this is not a particularly newsworthy event, but Vivendi is a B rated company that was able to raise these funds by paying interest of just 6.25%, or 330 basis points over government bonds. According to Merrill Lynch indices, the average B rated company should yield 560 basis point more than gilts, so you would think that investors were getting a raw deal. However, the market clearly thought otherwise because the deal was more than five times oversubscribed. Such is the demand for high yield at t...