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High Yield Market Faces Jitters From Low Oil Prices

Friday, December 18, 2015

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Low oil prices sparking sell off in junk bonds

- Barclays high-yield corporate index is down 6 percent, but the energy portion is down 22 percent.
- Moody’s says about one-quarter of the junk defaults this year come from energy.
- A fund controlled by Third Avenue Capital Management, a junk bond mutual fund, will shut its doors after suffering steep losses. The move sparked a larger sell off in high-yield debt this week.
- Investment funds are having trouble finding willing buyers for their junk bond assets, which are rapidly losing value.
- Few are concerned that the defaults could lead to financial contagion, but the Fed’s rate increase added extra pressure on the high-yield market. Moody’s sees the default rate rising in 2016.

2. Different crude benchmarks fetch different prices

- Everyone watches the headline figures for WTI and Brent, but most oil companies sell oil at other benchmarks that are often discounted from the more popular benchmarks. This happens because of differences in quality, costs of transportation, and regional supply/demand circumstances.
- Mexico’s oil dipped to an 11-year low this week at $28 per…




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