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Why High-Yield Debt Selloff Isn't 2007 All Over Again. Or Is It?

  • Analysts don't see contagion spreading as in financial crisis
  • Largest banks' corporate-debt inventories fell 20% this year
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Is There a Fire Sale Starting in High-Yield Funds?

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Wall Street is having a 2007 flashback as a high-yield debt rout triggers nightmares of hard-to-trade assets plunging in value and funds halting redemptions.

Jim Reid, a strategist at Deutsche Bank AG, wrote Monday that this month’s turmoil, including Third Avenue Management’s suspension of cash redemptions from a mutual fund that invested in high-yield debt, may be a harbinger of things to come. Berwyn Income Fund’s George Cipolloni said the similarities between markets now and those before the financial crisis are too big to ignore.