High-Yield Bonds Gain for Sixth Week in Europe as Sales Slow

Junk-rated corporate bonds rose for a sixth week in Europe, paring a selloff in June after the cost of insuring securities against losses fell to the lowest in two weeks. Debt sales slowed.

High-yield bonds returned 0.2 percent this week, bringing the six-week gain to 2.1 percent after the securities lost an average 2.3 percent in June, according to Bloomberg bond index data. The Markit iTraxx Crossover Index of credit-default swaps on 50 high-yield companies was little changed this week at 399 basis points at 12:26 p.m. in London. The gauge fell to a two-week low of 392 on Aug. 5.

European debt markets are recovering after Federal Reserve Chairman Ben S. Bernanke signaled the central bank may taper quantitative easing if the U.S. economy continues to improve. The extra yield investors demand to hold high-yield bonds in euros rather than government securities fell 7.7 basis points this week to 395 basis points, close to a more than two-month low of 392 on Aug. 6, according to Bloomberg bond index data.

“Credit markets have been fairly resilient so far in August,” said Joseph Faith, a credit strategist at Citigroup Inc. in London. “Uncertainty may rise again going into September but we still expect spreads to end the year tighter than where they are now.”

Sales of corporate bonds slowed this week to 3.6 billion euros ($4.8 billion), the least for any week this year and below the average of 14.4 billion euros since the start of the year, data compiled by Bloomberg show.

AA Group Ltd., the roadside recovery and insurance division of Acromas Holdings Ltd., is adding to its 300 million-pounds ($466 million) of securities maturing July 2018 and 325 million-pounds of bonds due July 2025 today. The company’s AA Bond Co Ltd. unit is selling more of notes that were sold on June 25 and are rated BBB- by Standard & Poor’s, its lowest investment-grade ranking.

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