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Third Avenue Management ripples hit global credit, bond risk soars 

December 15, 2015

Aleksandra Gjorgievska and Cordell Eddings, The Globe and Mail

Measures of bond risk surged worldwide amid concern that investors may face more losses in the roiling debt markets after Third Avenue Management froze redemptions from a high-yield fund and London-based Lucidus Capital Partners liquidated its entire portfolio.

Credit-default swaps that are used to insure against losses on junk bonds rose in the U.S. and Europe, with the risk premium on the Markit CDX North American High Yield Index rising to the highest level since November, 2012, and the Markit iTraxx Europe Crossover Index that tracks speculative-grade debt in Europe climbing for a fifth day. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, dropped as much as 1.7 per cent to the lowest levels since 2009.

“The market is in a tantrum,” said Tom Voorhees, a corporate-bond trader at Brean Capital LLC in New York. “There are a lot of investors taking time to look under the hoods and kicking the tires of funds to see what may or may not be next. The reality is people like to sell when things are going down.” Read more

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