Global high yield (HY) markets (in $ terms) saw a flat Q4 and a modestly positive 2021 as continued decline in default and distress ratios, and supportive technicals, were balanced out by the hawkish stance from central banks and growth fears over the rise of the Omicron variant.
Even as the global economic recovery continues to hold on, and Q3 corporate earnings were strong — with 42% of high yield companies beating EBITDA expectations, the number was still down from 59% in Q2 2021, and the Q3 season saw 65% of them mentioning in their earnings release that they are experiencing cost and/or labour inflationary pressures.
US HY outperformed euro HY over Q4 and financial year 2021, as euro HY is more sensitive to end of easy monetary policy on account of the secondary effect from ECB’s intervention in corporate bond markets. EM HY underperformed the others significantly in 2021, mostly due to volatility and weakness in China’s HY property sector.
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