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Financial Mirror (Cyprus) - - FRONT PAGE -

High-yield bond vol­umes of $6 bln were down from $16 bln in Jan­uary, and $11 bln in Fe­bru­ary 2014 as larger M&A-driven ac­tiv­ity sub­sided, de­spite the an­nounce­ment of quan­ti­ta­tive eas­ing in Europe, Moody’s said. In ad­di­tion, the rat­ing agency down­graded 16 Rus­sian cor­po­rates fol­low­ing the sovereign ac­tion, caus­ing the down­grade-to-up­grade ra­tio to in­crease in the re­gion.

“Although high-yield mar­kets have seen re­newed cap­i­tal in­flows that im­prove mar­ket liq­uid­ity, cap­i­tal in­flows did not trans­late into in­creased pri­mary ac­tiv­ity in Fe­bru­ary”, said Peter Firth, Moody’s As­so­ciate Man­ag­ing Direc­tor.

“How­ever, the pipe­line for mid-March has be­gun to fill with a num­ber of size­able re­fi­nanc­ing-driven deals”, added Firth.

The down­grade-to-up­grade ra­tio rose in Fe­bru­ary 2015 fol­low­ing a large num­ber of neg­a­tive rat­ing ac­tions on Rus­sian cor­po­rates, but Moody’s does not ex­pect a broad weak­en­ing of ag­gre­gate credit qual­ity among EMEA cor­po­rates in 2015.

Mar­ket ac­cess at the bot­tom of the rat­ing scale at B3 and lower is not a given, de­spite good liq­uid­ity in the mar­ket. Is­suance re­mains firmly at the B2 and higher rated level, with no lower-rated is­suers ac­cess­ing the mar­kets in Fe­bru­ary. In­vestors con­tinue to dis­crim­i­nate for credit qual­ity and raise con­cerns about the most ag­gres­sive deal terms.

The chal­lenge for con­cerned in­vestors lies, how­ever, with the QE­fu­elled spread com­pres­sion and im­prov­ing mar­ket liq­uid­ity, which could lead to deals with weaker credit pro­files and weaker covenants still be­ing com­pleted.

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