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No Pickup In High-Yield Issuance In Sight

The pace of new junk sales is likely to slow for the remainder of the year, agree strategists and economists.

The pace of new junk sales is likely to slow for the remainder of the year, agree strategists and economists. High-yield deals totaled $44.9 billion globally for the first four months of the year, representing 6.7% of outstanding market size, in the second-lowest relative volume for the period since 1996, according to data from Merrill Lynch.

Michael Taylor, high-yield strategist at Bear Stearns, expects U.S issuance to remain at a $20-25 billion clip per quarter for the remainder of the year, bringing the year's total in the range of $80-100 billion. The first quarter of last year saw around $37 billion in U.S. issuance alone, he noted.

John Lonski, chief economist at Moody's Investors Service, also expects volumes to remain below-trend for the remainder of the quarter. Though he said the recent pickup in bank loan and commercial paper debt, which is considered a leading indicator of future corporate bond issuance, suggests junk issuers are waiting in the wings. "Until uncertainties surrounding fallen angel downgrades of several large issuers are resolved, high-yield issuance will continue to be lower," he said, referring to volatility caused by General Motors and Ford Motor Co.'s potential descent to junk.

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