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High-yield debt is seeing a comeback after last year’s collapse.
Last week Jefferies released a report saying factors that led to the drop have now passed, and Bank of America's recent “High Yield Flow Report” shows that the high-yield debt market gained $11B in the last five weeks, coinciding with its biggest-ever capital inflow over a four-week period, Business Insider reports.
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The BofA report says the recent 40% gain in crude prices, improving economic data and “dovish support from the ECB,” make US HY's gain unsurprising.
Some analysts predicted doom when a number of high-yield-focused funds imploded late last year—but this revival should ease concerns.
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Still, despite US HY’s recent gains BAML urged caution—the report notes that market fundamentals are roughly the same, so the capital inflows are likely an upwards overreaction.
“In fact we think the recent rally has limited staying power,” it adds. [BI]
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