European junk bonds should go up over the next coming weeks as investors seek alternatives to government bonds, credit analysts said.
Bond yields of British, German, Spanish and other European government bonds are now falling, as the tumultuous months caused by the Greek debt crisis earlier this year seem to be behind.
Britain's 10-year bond yields fell today to 3.2%, the lowest level since April 2009. Bond yields move in opposite direction to price -they fall as investors buy the bond, on the perception that it is safer.
"Baring the emergence of a new stress point in European sovereigns (such as missing IMF targets), high yield should perform well in the coming months as investors continue to seek out higher fixed income returns in the face of historically low Bund yields," said analysts at Credit Sights.
The drama that surrounded European sovereign bonds in May and June has now calmed down. The cost to insure $10m of Greek debt has fallen to $683,000 -down from a record of $1m-, while Italy's fell to $126,000, down from $132,000 yesterday, according to data from Markit.
