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The now traditional summer disruption in the bond markets came this year with a long-overdue back up in high yield following vocal regulatory concern over risk in the leveraged finance market. But, unlike last year, despite record retail outflows from the asset class in mid-August, the sell-off seemed like a faint memory by the end of the month. Could the risks to the bond markets of short-term retail money have been overstated?
“We have been in a bull market for credit since 2009,” says Richard Zogheb, co-head of capital markets origination for the Americas at Citi in New York. “We lost 90 days in 2011 and a month or two last year, but otherwise it has been an uninterrupted run. I expect we’ll see a correction at some point.” But as each year passes that correction almost seems further away than ever.
Between late June and late August, $17 billion was withdrawn from US high-yield funds, representing 5% of retail assets under management in the market. The lurching reversal in sentiment came as little surprise as many observers have done little else over the last two years than debate the bubble in high yield.
