High-Yield Credit Suffers Biggest Quarterly Loss Worldwide Since 2011

Junk bond investors suffered their biggest quarterly loss since 2011, losing 1.7% in Q3 pushing yields up to one-year highs (despite Treasury yield compression). Managers, knowing full well the underlying liquidity to handle any further selling is not there are out en masse explaining that "high-yield should bounce back in the fourth quarter," relying on the fact that 'historical' defaults are still low and the economy is recovering (as if that's not priced in already). The worst hit segment of the junk market is CCCs and below - at 22-month lows - as Bernanke and Yellen forced investors ever further along the risk spectrum for yield. Of course, equity markets (Russell 2000 aside) have ignored much of this decline until recently, but the plunge in leveraged loan issuance suggests all that cheap-buy-back-funding is rapidly disappearing (even for the best credits and biggest names).

As Bloomberg reports,

High-yield bond investors worldwide have been hurt by the biggest quarterly losses in three years as geopolitical tensions and the threat of a U.S. interest-rate increase curbed risk appetite.

Speculative-grade notes forfeited 1.7% in the last three months, the most since the third quarter of 2011, according to Bank of America Merrill Lynch index data; the average yield on the debt climbed to a one-year high of 6.26% on Sept. 29, the data show

The junkiest of the junk was worst hit... after being driven to that insanity by The Fed...

And stocks are starting to catch on...

And issuance is plunging...

removing the buyback-funding that "fundamentals" need to engineer reality for stocks.

Source: Bloomberg

Comments

[disabledvet]

There is a yield where cash will start to be deposited in a bank.

[Duffminster]

This may be germane:

"Fed Scrutiny of Leveraged Loans Grows Along With Bubble Concern"

http://www.bloomberg.com/news/2014-10-01/fed-scrutiny-of-leveraged-loans-grows-along-with-bubble-concern.html

And this as well:

"Here's The Massive Disconnect Between Stocks And High-Yield Bonds That Has Some People Predicting More Pain Ahead"

http://www.businessinsider.com/high-yield-bonds-are-falling-2014-10

[NoDebt]

Got out of my heavily-overweight position on high yield 18 months ago (posted about on ZH).  

In other words, I NAILED IT!  

Horseshoes, hand grenades and my timing.  Close enough is good enough in every case.

[Doubleguns]

Careful there, your head might not be able to handle the pressure as it swells up rapidly. 

[NoDebt]

If you make the assumption that 100% of what I post is either sarcastic or self-deprecating, you will almost always be right.

[Doubleguns]

Same here. LOL

[LULZBank]

Oh nos!!!

Buy Gold, short Stawks Bitchezz!!

[BandGap]

Yen popped through 110 last night.

Tick Tock

[Bell's 2 hearted]

Luckily, japan energy independent*

*they've harnessed the energy from godzilla, mothra, ....

[Winston Churchill]

Tyler,

Whats happening in the shadow banking system ?

Long time since a specific post about it.

[Bell's 2 hearted]

"Junk bond investors suffered theirbiggest quarterly loss since 2011, losing 1.7% in Q3 pushing yields up to one-year highs"

buyback fuel

 2011 last time we saw a 10% correction in equites

[q99x2]

Buy weapons and impeach Obama.

[Winston Churchill]

Impale Obama.

FIFY.

[KnuckleDragger-X]

Sounds good to me since we can't hang him cause that would be rasist.

[aliki]

here's a rich story as a follow-on:

BlackRock CEO blames regulators for push into risky assets, Financial Times says 
BlackRock's CEO Larry Fink said policy makers are to blame for pushing investors into riskier assets, reports the Financial Times. Fink said central bankers and regulators, including those at the Bank of International Settlements and the Financial Stability Board, were responsible for today's markets because of their loose monetary policy and tight financial regulation, adding they they should stop their "surprising and troublesome" criticism of the results. 

[Ewtman]

It can only get worse as this warning about rising yields, especially junk, noted earlier this week...

http://www.globaldeflationnews.com/10-yr-treasury-index-yieldelliott-wav...

[madcows]

let's see, fannie and freddie are junk bond quality, and their share holders just got a big FU.  They lied, obfuscated, hid all the bad info.  Clearly they are corrupt, AND the judge decided in their favor.  So, why should any investor put their money at risk if they know they'll have no protection in the courts.  FU .gov

[youngman]

I think high yield is the canary in the coal mine....they will crash first...the first domino to fall....

[The Phallic Crusader]

OT a bit, but I think Russia needs to start considering gold backin for realsies:

http://www.bloomberg.com/news/2014-09-30/putin-reserve-rubles-vanish-in-...

Or swiftly stop using the dollar and use a mix of yuan, ruble, and rupee. Maybe.

And yes - Bloomberg is abject propaganda, I realize.  Fromt he link above:

_{Putin, 61, is more interested in territorial expansion. He told Ukraine President Petro Poroshenko that if he wanted to, within two days Russian troops could arrive not only in Kiev but also in Riga, Vilnius, Tallinn, Warsaw or Bucharest, Sueddeutsche Zeitung reported this month, citing EU documents}

Good grief, that's over the top, even for the likes of a msm fin site

[Spungo]

Credit crisis? So fucking bullish for stocks. I think I just came.