Turbulent sessions always leave us with interesting conclusions. In this case, January has been a very bad month for all public assets, let alone the stock market. We have seen falls in the stock market and yield rises in the fixed income space.
This has triggered a feeling of panic in some investors, especially in the riskier listed fixed income market, where we see that a herd flight has begun:
Indeed, in January more than 11,000 million euros were wiped out from American High Yield, a very high figure if we compare it with the average for the category, which is usually around 2,000 million euros.
The European High Yield has also suffered, although not as sharply as the American: the figure has been around -500 M euros of outflows.
In a market stress event, liquidity plays a crucial role. Despite the large outflows, we have "only" seen how last year's High Yield yield (close to 3%) evaporated during the month of January. With default rates at their lowest and very tight spreads, any excuse is valid to flee from an asset that does not offer the best return-risk ratio.