KIO - High-Yield CEF Sector Update: Defying Gravity But For How Long?
Well, that was quick. There was barely time to say "oh my" when the high yield sector bounced right back from its December sell-off. The long-expected corporate cataclysm over ever-higher leverage amid a slowing economy has been put on hold, at least for the time being. Risk appetite has returned, and the sector has benefited from both a tightening in credit spreads as well as a drop in rates.
Source: ADS Analytics LLC, Bloomberg
We are fairly cautious on the sector given worsening valuations (lower nominal rates and tighter credit spreads) as well as fundamentals