Credit woes heap more pain on high-yield U.S. bonds
By Kate Duguid and Megan Davies NEW YORK (Reuters) - High-yield U.S. bonds suffered more pain on Thursday as major junk bond exchange-traded funds fell to the lowest level since February 2016 and an index for credit insurance protecting against exposure to junk bonds widened to a nine-year high.
By Kate Duguid and Megan Davies
NEW YORK (Reuters) - High-yield U.S. bonds suffered more pain on Thursday as major junk bond exchange-traded funds fell to the lowest level since February 2016 and an index for credit insurance protecting against exposure to junk bonds widened to a nine-year high.
Investors are increasingly concerned the coronavirus outbreak will hit U.S. corporate cash flow if it keeps workers at home or prevents companies from paying employees.
The Markit high-yield credit-default swap index
The price of the SPDR Bloomberg Barclays High Yield Bond ETF fell to the lowest since February 2016
Closed-end high-yield bond funds also fell on Thursday, notching far larger moves than the broader high-yield market. Closed-end funds have leverage associated with them and saw larger outflows from investors wary of risk.
"The reason (closed-end funds) go down faster is because they're levered," said Andrew Brenner, head of international fixed income at NatAlliance Securities.
"In down markets, these things get hit pretty hard. And this is a down market."
The DoubleLine Income Solutions fund
Investor worries about the coronavirus ' effect on companies' cash flow has mounted enough that it has begun to affect the investment-grade market as well, a high-grade sector that can function as a haven in times of market volatility.
New high-yield bond issuance has been tepid for the past three weeks, as issuers pull deals and investors shun risk. But the market for investment grade issues was active until Wednesday.
"Up until yesterday, the IG market was still open and deals were still getting done. It's only within the last 24 hours even that market has also slowed," said David Leduc, active fixed income chief investment officer at Mellon.
Some companies have begun to draw on credit lines for fear that capital markets may be closed to them for the time being.
There will be more such announcements, said Leduc, from companies in sectors directly hit by coronavirus including travel, leisure and energy, which expect to see a hit to earnings. Companies with debt maturing in the coming few quarters may also draw down loans.
The commercial paper market, which provides companies with short-term funding, has not yet seen a consistent slowdown in issuance, though the cost to borrow has risen this week, according to Federal Reserve data.
(Reporting by Kate Duguid, writing by Megan Davies; Editing by Chizu Nomiyama, Nick Zieminski and Tom Brown)
This story has not been edited by Firstpost staff and is generated by auto-feed.
ATHENS (Reuters) - Greek police used teargas and water cannon to disperse people who had gathered in central Athens on Saturday to protest against mandatory COVID-19 vaccinations. More than 4,000 people rallied outside the Greek parliament for a third time this month to oppose mandatory inoculations for some workers, such as healthcare and nursing staff.
ISTANBUL (Reuters) - Two Turkish soldiers were killed and two were wounded in an attack on their armoured vehicle in northern Syria, and Turkish forces immediately launched retaliatory fire, Turkey's defence ministry said on Saturday. "Our punitive fire against terrorist positions is continuing," the statement on Twitter on said. It did not specify where the attack occurred, but media reports said it was in the al-Bab area.
By Marcelo Rochabrun SAO PAULO (Reuters) - Protesters took to the streets in several Brazilian cities on Saturday to demand the impeachment of far-right President Jair Bolsonaro, whose popularity has fallen in recent weeks amid corruption scandals against the backdrop of the pandemic. This week, news broke that Brazil's defense ministry told congressional leadership that next year's elections would not take place without amending the country's electronic voting system to include a paper trail of each vote. Bolsonaro has suggested several times without evidence that the current system is prone to fraud, allegations that Brazil's government has denied