One reason for the strong performance of high yield bonds this year has been that there simply aren’t enough of them to satiate investor demand according to the Wall Street Journal (WSJ).
This is a massive change from about a year ago when almost nobody wanted to touch riskier bonds, or any corporate debt for that matter.
WSJ: The relative paucity of bonds available to trade has steered fund managers instead toward new issues, galvanizing that market. Dealogic says $104.4 billion in new high-yield issuance has come to market in 2009 to date, up from $47.7 billion in all of 2008 and approaching the 2007 full-year total of $134.3 billion.
This shows that liquidity has improved to the point that not only the largest and strongest companies have access to credit. There is also capital available to fund smaller, less stable companies which are frequently growth engines for the future. A dearth of junk bonds for investors shows that we’re well past the credit crunch.
Hopefully this trend will follow its current course all the way to the point that liquidity reaches small businesses, who remain cash-strapped and shunned by lenders.