May 2 (The following statement was released by the rating agency)
In the latest edition of its quarterly European
High-Yield (EHY) chart book, Fitch Ratings says that Q113 marked a record
quarter for new issuance in the EHY market, an indicator that 2013 may be a year
of further growth potential for the asset class. Developed market non-financial
corporates issued EUR28bn in new bonds, taking advantage of record low yields
and strong investor demand for riskier asset classes in their quest for real
Speculative-grade entities steadily ramped up issuance in the months following
the euro-affirmative ECB announcement in July 2012. Subsequent falls in risk
premiums demanded by investors allowed firms to issue bonds with longer
maturities and marginally increase the proportion of lower-rated credit in Q113
compared with Q112.
Corporates domiciled in troubled eurozone nations have benefited from the
positive market momentum. Companies based in Italy and Spain were able to issue
up to 85% and 53%, respectively, of total 2012 volume in Q113.
The Fitch EHY Index recorded a default rate of 0.19% by volume for the 12 months
to 31 March 2013, down from 0.69% at the end of 2012. The relatively high
quality of outstanding bonds in EHY - mainly comprising 'BB' rated fallen angels
- coupled with investors' continued preference for higher-quality credits from
repeat issuers, helps to cushion the default rate during periods of elevated
EHY bonds have generated total returns of 3.9% in the year to end April,
slightly lagging the US HY market, which posted gains of 4.6%, according to data
from Bank of America Merrill Lynch. Investor flows into EHY have tended to
coincide with periods of positive total return performance, and this
relationship has demonstrably been in force since July 2012. Investors have
channelled EUR2.9bn in net flows into EHY in Q113, compared with net outflows of
similar magnitude for investment grade credit.
The full chart book illustrates recent trends in high-yield bond issuance,
maturities, default rates, fund flows and relative performance, as well as
secondary market risk-adjusted pricing. It is available at www.fitchratings.com
or by clicking on the link above. The report outlining key findings from Fitch's
latest senior fixed-income investor survey is referenced below.
Link to Fitch Ratings' Report: European High-Yield Chart Book - May 2013