A quick observation -
The high yield bond market has been taking in money like there's no tomorrow as people reach for Fed-underwritten credits with high yields. The market has become incredibly frothy, and risk premiums are miniscule. Now that the EU has stabilized, global (especially US) money is starting to flow back to the continent in search of yield. The EU crisis helped drive money out of EU paper, and into US paper as a haven...now things (read: "money flows") are reversing.
The fact of the matter is that there are some dicey, dicey high-yield credits in the US that have benefited from the international hunt for yield - especially as the EU crisis sent money screaming to the US. The flow was like the tide that lifted most HY boats. Now that risk premiums have been decimated, and the EU paper sings its siren song to yield chasers, people will start to question their holdings of US HY paper...given the opportunity to hold something else (something even being sovereign in nature - with the implicit guarantees that sov. paper holds) exists.
I do not like the US HY market in aggregate here (use ticker "HYG" as a proxy), and think that the tide will go out during Q2-Q3 '13 for this space. Spreads will blow out and these shady credits will experience turbulence. Brace for impact.
