on lower-quality corporate bonds and high-yield debt

Dear all,

How should I understand the underlined?

Thanks in advance.

Eartha


Stock market volatility fell and risk appetite continued to increase, helping spreads narrow on lower-quality corporate bonds and high-yield debt.

How should I understand the underlined?

Stock market volatility fell and risk appetite continued to increase, helping spreads narrow on lower-quality corporate bonds and high-yield debt.

'lower-quality corporate bonds' means bonds issued by a corporation on which there is a significant risk that the issuer will default (that is, be unable to pay the interest due the bondholder.)

'high yield debt' is debt upon which the lender will receive a better than average return (rate of interest) because there is a significant danger that the borrower will default.

What this sentence is saying is that because the lenders of money are now more willing to take the risk that borrowers will be unable to repay
them than they were before, the rate of interest a borrower has to be willing to pay is lower.

Please post again if this is still too difficult for you to understand.

Quote:

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Originally Posted by Eartha

Dear all,

How should I understand the underlined?

Thanks in advance.

Eartha


Stock market volatility fell and risk appetite continued to increase, helping spreads narrow on lower-quality corporate bonds and high-yield debt.

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Not a teacher only a native.

I would say this is a question for economists to answer.

Although I have not studied economics or any aspect of finance, if I had to guess at what the underlined phrase meant, I would say:

Lower-quality corporate bonds and high-yield debt became more attractive to investers as the spreads narrowed on these due to the falling volatility of the stock market and the continuation of risk appetite.

To fully understand the sentence, you need to understand the economic terms being used.

Spreads narrowed - the stock market doesn't have to move as far to make a profit. If spreads widened, the stock market has to move more before a profit is made.

Risk Appetite - How much risk is an organisation willing to take to achieve the desired returns.

Hopefully an English teacher who is also an economist will reply (I just googled the terms to try and help you - I am in no way an economist).

EDIT: I see someone has posted a clearer answer than me, I hope they explained it better than I have!