Market Update: European High Yield Bonds

Assets under management in European high yield bond funds have grown from €12 billion at the beginning of 2009 to €57 billion in April 2014

Shannon Kirwin 26 June, 2014 | 3:45PM
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Investors are diving into European high yield corporate debt with gusto, and the feeding frenzy shows no signs of slowing. Issued by companies with below investment grade credit ratings, high yield bonds (also called “junk bonds”) represent one of the fastest-growing areas for European open-end funds and ETFs. Assets under management have grown from €12 billion at the beginning of 2009 to €57 billion in April 2014, according to Morningstar data.

Does this mean that investors should shun the high yield market?

That’s partly because the market itself has grown, thanks to structural changes in the marketplace. Unlike their US counterparts, prior to 2008 most European issuers with credit ratings of BB or below preferred to obtain financing privately from banks rather than issuing debt on public markets. However, that pattern has changed dramatically since the financial crisis.

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Shannon Kirwin  is a fund analyst with Morningstar

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