US debt markets: Record high-yield issuance drives US debt boom
Investors are gorging on every part of the US debt spectrum, but especially high yield. Returns are high, volumes are at record levels and spreads are tightening. Is it too early to call the top of the market? Joti Mangat reports.
APPARENTLY HE’S NEVER had it so good. And that’s starting to make some people nervous. Henry Kravis, co-founder of Kohlberg, Kravis and Roberts, recently pointed the way for the private equity sector in his comment to Bloomberg in March that the financing achieved on KKR’s recent acquisition of San Francisco-based Del Monte Foods "was the most attractive financing that we have ever done".
The high-yield market in the US is booming. Volumes are flying. Spreads are tight, and dealers expect them to get tighter still.
After breaking issuance records in 2010, high-yield bonds are on pace for another record year, already reaching $133 billion by mid-May, compared with $302 billion for 2010. The $107 billion printed in the first three months of the year set a new quarterly record. According to Peter Acciavatti, managing director and head of JPMorgan’s high-yield and leveraged-loan credit strategy team, US investor allocations to high yield continue to grow, with domestic retail mutual funds and foreign institutional investors adding to already robust demand. "We are on pace to double last year’s inflow into US high-yield mutual funds.