High-yield market attractive, liquid as defaults drop, spreads widen, DWS Investments' Sullivan says

By Sheri Kasprzak

New York, March 23 - The high-yield market is looking more attractive to investors, said Gary Sullivan, head of high-yield bond portfolio management for DWS Investments, due to wider-than-average spreads, improving default trends and economic improvements.

"Spreads were tightening last year," Sullivan said during DWS' second-quarter press briefing held Tuesday.

"Given that with high-yield bonds trading at 8.5% and with default rates trending down below historical levels, there's a lot of liquidity in the market. It's quite amazing that the type of poor-quality names didn't have any chance of getting money in the market last year are having an easier time this year."

Sullivan pointed to Lyondell Chemical Co.'s recently upsized $2.75 billion offering of 7.5-year notes. Price talk on the notes, Sullivan said, has been between 8% and 8¼%.

"It's first-lien, but it's also a company that's coming out of bankruptcy here," Sullivan pointed out.

The Lyondell notes are set to price Wednesday.

A volatile equity market is also helping high-yield bonds appear more attractive to investors, Sullivan said.

"Where are you going to put your money right now?" Sullivan asked. "There's still a lot of volatility in equities."

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