HIGH YIELD
Three-year sector performance
SECTOR ANALYSIS
Global high yield and US dollar high yield
outperformed euro high yield over the threeyear period in US dollar terms. However, the
underperformance by the latter is mainly
due to a weakening of the euro against the US
dollar. The sector generally outperformed
by a considerable margin as euro high yield
spreads have been narrower than that of
the US dollar high yield compared to three
years ago. The sector’s top performers were
mainly US dollar high yield funds with a core
focus on Asia. In 2015, these funds typically
held a significant position in China high
yield properties, which had a particularly
strong run.
MARKET REVIEW
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
Three-year annualised return/volatility
High yield spread across various regions
including the US, Europe and Asia have
widened compared to three years ago.
In 2013 and the first half of 2014, high
yield spreads generally tightened amid an
improving global macro outlook and as
investors chased higher-yielding assets due
to interest rates at historic lows. Spreads
subsequently widened on increasing
uncertainties over global growth. Such
concerns intensified in the second half of
2015 as the China market slumped and
energy prices fell sharply, driving spreads
even wider. As sentiment improved in 2016,
spreads tightened but those on US high
yield stayed even wider than that of Asian
high yield as the US experienced its highest
number of bond issuance for over a decade.
MARKET OUTLOOK
While the ECB’s easing program should
prove supportive to riskier assets, these
measures may already have been priced into
their valuations. US high yields are currently
trading at an attractive level as the economic
outlook continues to look compelling among
developed markets. While Asian high
yield spreads have narrowed, the supply of
bond issuance in the region is expected to
be reduced over 2016, which should help
provide some support for the asset class.
Provided by FE Advisory Asia as of 31 May ’16
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)