In a new report, Marty Fridson, CIO of wealth management firm Lehmann Livian Fridson Advisors LLC, discussed the recent sell-off in the high-yield market. According to Fridson, the period of extreme overvaluation has ended, but energy and metals/mining bonds have played a disproportionately large role.

Background

Fridson uses econometric modeling to make valuation determinations in the high-yield market. His firm has determined that 82 percent of the historical variance in the option-adjusted spread (OAS) of the Bank of America Merrill Lynch U.S. High Yield Index has been due to only five variables: credit availability, capacity utilization, industrial production, speculative-grade default rate and five-year Treasury yield.

The Numbers

Fridson determined…

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