Bonds: US high-yield debt markets under pressure as oil slides

These were the movements in the yields of the most widely-followed 10-year sovereign bonds:

US: 1.70% (-4bp)

UK: 1.41% (+0bp)

Germany: 0.23% (+2bp)

France: 0.61% (+2bp)

Italy: 1.68% (+1bp)

Spain: 1.75% (+0bp)

Japan: -0.03% (-7bp)

Greece: 10.79% (+6bp)

Gilts were well-bid on Tuesday ahead of what many in the markets thought would be a key speech by Fed chairwoman Janet Yellen scheduled for the next day, against the backdrop of another downdraft in crude oil futures, renewed losses in the market for so-called high-yield US corporate debt and despite Monday's out-sized gains.

To take note of as well, the yield on longer-term Japanese government bonds on Tuesday became the first of any major economy to fall into negative territory.

Oil futures slid sharply lower after the close of trading in London, after the US Energy Information Administration, the US Department of Energy's statistical arm, cut its 2016 price forecast for Brent oil from $40.15 per barrel to $37.52.

Earlier in the day, Goldman Sachs's head of commodity strategy cautioned that oil prices might need to drop below $20 a barrel in order to balance the market.

Unsurprisingly perhaps, in afternoon trading the CDX North America High Yield Index, a benchmark referencing credit-default swaps on 100 companies whose debt is considered to be 'high-risk', rose by another 17 basis points to 589 - the most since at least August 2012.

A sub-index for energy companies saw a jump of 38 basis points to 1,525.

Credit default swaps are used by some companies and investors (and speculators) to insure against the risk that the company that issued the underlying debt might default on its debts.

One basis point is one-hundredth of one percentage point.

In parallel, the risk-premiums on Italian and Spanish 10-year sovereign bonds jumped to their widest since July 2015, to 156 and 163 basis points, respectively.

To take note of, in response to a question from the audience and speaking in Miami Goldman Sachs Group chief, Lloyd Blankfein said European banks had so many channels available to them to access funding that his bank had not stopped lending to them, Bloomberg reported.

During the Great Financial Crisis, US banks at one point sharply curtailed their lending to European financial institutions, in part due to the perceived risks in some countries and also in order to husband capital as credit and even interbank markets dried up due to so-called 'counterparty-risk'.

“There are so many funding mechanisms available in Europe that allow banks to generate liquidity,” Blankfein said.

“By and large, we haven’t been that worried about the big global banks, but I won’t write a blank check on that. Something could happen that would make us that way.”