Euro High Yield Bond Funds Still Offer Gains Despite Sell-off

Though only a few issuers in the Euro high yield space operate in the commodity space, the asset class was broadly sold off as investors retreated to safer-haven assets

Mara Dobrescu 27 October, 2015 | 12:05PM

During the first nine months of 2015, the Eurozone high yield market suffered from an increase in risk aversion owing to concerns about the Chinese economic slowdown and declining commodity prices. The Morningstar EUR High Yield Bond category is thus down -0.17% year-to-date (in EUR).

Market volatility took its toll on many hybrid bonds during the sell-off

Though only a few issuers in the Euro high yield space operate in the commodity space or are directly exposed to emerging markets, the asset class was broadly sold off as investors retreated to safer-haven assets. Nevertheless, the fundamentals of the asset class appear to remain sound. Over the last 12 months, the average default rate among European high yield issuers remained stable at 2%, a figure well below the long-term historical average. Many fund managers thus remain confident in high yield issuers’ financial health and some have taken advantage of the market turmoil to add to their top convictions at attractive prices.

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About Author

Mara Dobrescu

Mara Dobrescu  is a fund analyst at Morningstar France.

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