High Yield Bonds: 'The Rally'

A phenomenon exists in the health field called "the rally". A terminally ill patient appears to be on the brink of passing. But suddenly, they become more lucid and responsive. They may even become eager to talk and have the renewed energy to get out of bed. A few have gone so far as to get back to regular living for a day or two. Unfortunately for most, "the rally" ends up being a fleeting, confusing and often inexplicable event, as the patient often ends up passing almost immediately after. Recognizing this phenomenon may stretch beyond the physical realm, one has to wonder if "the rally" is currently taking place in segments of the high yield bond market.
With this in mind, we return once again to the high yield (NYSEARCA: HYG) hospital to check on our patients.
The Terminally Ill
In February, we had five companies that were effectively on the brink of expiration. Three remain in intensive care and are listed below, while one has been added to the list in Breitburn.
Breitburn Energy Partners (BBEP)
Peabody Energy (BTU)
Seventy Seven Energy (NYSE: SSE)
Ultra Petroleum (NYSE: UPL)
What of the other two? Energy XXI (Nasdaq: EXXI) delayed interest payments on the debt of one of its subsidiaries in March. In short, the defibrillator has now been drawn and the bonds have exited the index. As for the other, this terminal company and former Seeking Alpha favorite is apparently experiencing "the rally" and... Read more