What is the fundamental catalyst for the underperformance in HY:
“Bleak economic conditions warrant wider spreads,” Schuller said. “The greater refinancing risks and consequently default risks for speculative-grade issuers will contribute to underperformance compared to investment-grade issuers.”Somehow the global equity market has missed all of the abovementioned memos, especially over the past month.
European companies must refinance 565 billion euros ($756 billion) of debt maturing by the end of 2010 and speculative- grade issuers will have the most difficulty amid the “rapidly deteriorating” global economy, Standard & Poor’s said last week.
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