Big bellwether junk bonds tank
By Robert Smith
LONDON, Sept 29 (IFR) - Bonds from some of the largest European high-yield issuers have tumbled in value this week, with market participants warning that it could precede a broader sell-off in the asset class.
Cornerstones of the high-yield benchmark such as cable companies Altice SA and Unitymedia have been under pressure, with the former's 2.825bn of euro holdco bonds plunging to record low cash prices on Tuesday.
"All the things that have really traded down are consensus longs," said an investor. "Liquidity is really thin and you've got to ask who is the marginal buyer if the market's already long?"
A second investor said that banks are not bidding risk at the moment, which would usually put a floor on the price action.
European high-yield is no stranger to plummeting bond prices, with Phones 4U's collapse in September 2014 triggering a crisis of confidence in the debt of many European companies.
However, the pressure then was focused on small illiquid bonds at the bottom of the ratings spectrum.
"What's different this time is that it's the really large cap liquid paper that's getting hit," said a senior leveraged finance banker.
"The situations that had taken pain before were largely esoteric deals for small companies, which real money investors had transitioned out of when the crunch came. But now some of the most widely held bonds are getting slammed." Continued...