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Bargain hunters spread to Europe

What's in a name? The whole reputation of the corporate debt market, if the banks are to believed. They argue that 'high-yield debt' equates to a dynamic, thrusting new market with eager investors, enterprising issuers and bigger fees for the banks. But 'junk bonds' conjures up nasty images of hostile leveraged buy-outs, the collapse of Drexel Burnham Lambert and the disgrace and imprisonment of junk-bond pioneer Michael Milken.

"People generally stopped referring to them as junk bonds at least six or seven years ago," says Michael Browne at Citicorp. "That name negatively reflects on what we believe is a very viable investment instrument and brings with it the negative stigma attached to the hostile leveraged buy-outs which were a big piece of the market in the 1980s."

Joe Biernat at Deutsche Bank agrees that European high yield deserves better than to be tarred with the same brush as its American cousin. "It's a shame just to define it as junk," he says. European investors are cautious enough towards high-yield corporate bonds, without having them dwell on the American market's crisis of 1989 to 1990.

In fact, some issuers even find the term high yield too strong.

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