Debt traders flee Junkyard's dogs as Oil rout extends yield gap

NEW YORK: Debt investors are abandoning the bottom rungs of the speculative grade market as commodity prices at their lowest level in more than a decade pummel borrowers in the energy and mining industries.

The yield gap between higher and lower-rated junk bonds expanded to the widest in more than three years, with the large number of energy and mining companies ranked CCC and lower the riskiest bets driving the dichotomy, said Martin Fridson, a money manager at Lehmann Livian Fridson Advisors LLC. When removing those companies, the yield on CCC bonds barely changed in July, creating “an industry effect in disguise," he said.

“When you see the index, you think you're buying all the CCCs cheaper," New York-based Fridson said here. “But outside of energy and metals, which look too scary to buy, the others are trading where they were."