The end of the financial crisis not only brought about a rally in the equity market, it also touched off a furious rally in the high yield bond market.  Anyone brave enough to buy in the teeth of 20%+ yields has made a killing.  The question is whether the rally has gone about as far as it can?  Despite yield spreads having returned to historically low levels money continues to flow into the sector.  The most recent beneficiary has been the bank loan market where new loans are getting done in a covenant-lite fashion.  You can tell the sector is hot, because a new ETF has been proposed to take advantage of demand.  This underlying bid bleeds over into the equity sector via the market for control.  Private equity firms are emboldened by the cheap money available in the credit markets and can bid aggressively for targets.  In today’s screencast we look at the state of the high yield bond market.

Items mentioned in the above screencast:

High yield bond spreads have come in as much as they can.  (Pragmatic Capitalism)

Ringing the bell on the leveraged loan market.  (Distressed Debt Investing)

Bank loans are hot.  Hence an ETF.  (IndexUniverse)

Daily price chart of the iShares iBoxx High Yield Corporate Bond ETF (HYG).  (Finviz)

Update:  The rebound in CLOs.  (Bloomberg)