High-yield bonds can't keep up with investor demand

Thu Mar 28, 2013 10:42am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Joy Ferguson

NEW YORK, March 28 (IFR) - The US high-yield market finished out the first quarter with a solid US$90.19bn in new issues, but with investors desperate to find yield, market demand far outpaced the available supply.

Even though the tally was in line with the US$90.64bn that priced in the first quarter of 2012 - a year that saw a record total US issuance of US$326bn - bankers say they are struggling to find enough deals to satisfy investor appetite.

"The first quarter calendar was not as crowded as we would have liked," said one high-yield banker.

"It was gangbusters in January, but then it petered out a bit. Any issuer that had callable or very near callable bonds has already addressed those, and I think it's going to be a little bit slower going forward."

The relatively limited volume helped push yields to record lows. On the Barclays high-yield index, the yield-to-worst hit its lowest ever level of 5.56% earlier in March. The previous low, 5.61%, was set in January.

"People are buying high-yield because they need income and there isn't a lot of it out there," said Gershon Distenfeld, head of US high-yield for AllianceBernstein.

"Nobody thinks they're going to get rich buying high-yield."

Analysts at BofA Merrill said they don't expect this year's volume to match last year's tally - they estimate US$275m to US$300m in new high-yield issuance - and underwriters say they are looking at new opportunities, including first-time issuers and tougher corporate stories.   Continued...