High yield: the end of the affair?

Is the high yield market hot or is it not? Conflicting reports abound.

Earlier this month Ineos, the UK chemicals group, sold around €1.75bn of high yield bonds, the biggest ever issue of its kind in Europe. But despite being four times oversubscribed in the primary market, the bonds performed poorly in secondary markets as investors sold out. Other recent high yield issues, such as the €1bn offering from Italian car maker Fiat, have suffered a similar fate.

Investors' ambivalence about high yield bonds is matched by banks' apparent ambivalence when it comes to high yield hiring. HSBC has put plans to expand its high yield team on hold, and recruitment at French bank Calyon, which moved into high yield and emerging market debt for the first time last year, seems to have fizzled out.

However, recruiters say it's too early to bemoan the death of high yield hiring in Europe. Calyon may not have announced any recruits since October, but it's apparently still interested in adding headcount in the area. So too, apparently, are Deutsche Bank, and Dresdner Kleinwort Wasserstein (DrKW), which reshuffled its fixed income team last October. WestLB is also expected to hire in high yield following this week's announcement that it is forming a leveraged debt fund business.