Europe’s high yield new issuance “lacks fundamentals”
Buyers are fighting for new issues, driving down yields and possibly storing up trouble for the future as default rates may start to rise
“It is very clear that the models used to determine the ability of a high yield company to repay its debts are severely broken,” wrote Richard Travia, director of research at Tradex Global Advisors, in a note in November 2013.
“As in the late stages of the housing boom, underwriting standards in the corporate credit markets have loosened as the offer continues to get lifted at higher prices for CCC credits. Today more than 50% of the new issuance for senior bank debt is covenant-lite
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