European junk bond investors are on the horns of a dilemma as squeezed yields are closing off opportunities to make big returns except in the riskiest structures or credits. Many are unhappy with trading levels, but cannot bring themselves to cut exposure. "We can all find loads of reasons to want to reduce risk and exposure to high yield, but no one feels quite ready to do it," said one London-based investor. "Even though we've come a long way over the past year in terms of absolute value, it feels expensive on many measures. We are really on the horns of a dilemma - our overall positioning is not chasing, but not really feeling like we want to be significantly underweight. We think there is a decent chance we get some correction in June that is driven by market uncertainty." This kind of positioning means that credit dispersion in the market has "collapsed", said one senior leveraged finance banker.
展开▼
