Signs of rising stress in the High Yield market’s largest sector, Energy

(Jan 2020) On the back of the shale oil and gas boom in the US, Energy has slowly become the preeminent concentration of the High Yield space. We believe that this level of debt is increasingly becoming unsustainable for the market, as observed in 2015-2016 during the first Energy crisis, or more recently in Q4 2018. Today, after a period of calm, signs of stress are appearing around the Energy sector again.

Should these warning signs be taken seriously? And what should a credit investor do to mitigate these risks?