Cracks Appear in High-Yield Valuations Even as Defaults Stay Low

(Bloomberg) -- The number of corporate bonds in Europe falling into stressed or distressed territory has jumped this year despite a relatively benign outlook for speculative-grade default rates.

So-called “stressed” bonds, with a secondary price of less than 90, and those in distress, a price of less than 60, represent nearly 11 percent of the Bloomberg Barclays High Yield Index versus only 2 percent a year ago.

Secondary valuations continue to be weighed down by steep losses in the latter stages of 2018 and a primary market that has yet to gain momentum. The current mid-February tally of 80 stressed/distressed bonds is the highest since 2016, when a broad-based selloff gripped risk markets amid fears global growth was slowing.

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