NEW YORK (Reuters) - The sharp rise in bond yields is unlikely to end the frenzied activity of leveraged buyouts because valuations in stocks are too attractive to pass up for private equity, Paul Hickey, co-founder of Bespoke Investment Group LLC, said on Wednesday.
"If you look back, I would argue that the LBO activity is a function of the valuation of the market," Hickey said at the Reuters Investment Outlook Summit in New York.
Price-to-earnings multiples in equities are at a level "where it's a no-brainer" for private equity, he added.
The price-to-earnings multiple on the Standard & Poor's 500 Index .SPX currently stands in the high teens. By comparison, PEs were over 30 during the 1990s tech bubble.
It's not surprising that rising bond yields have deterred LBO activity, Hickey said. "As long as the market is volatile, you are going to see people sitting on their hands a little bit," Hickey said.
But once the Treasury market stabilizes, the LBO market will pick up, he added. On Wednesday, the yield on the benchmark 10-year U.S. Treasury note retreated from five-year highs above 5.33 percent to 5.22 percent, a day after concerns about rising interest rates drove a stock-market sell-off.
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