Junk bond investors suffered their biggest quarterly loss since 2011, losing 1.7% in Q3 pushing yields up to one-year highs (despite Treasury yield compression). Managers, knowing full well the underlying liquidity to handle any further selling is not there are out en masse explaining that "high-yield should bounce back in the fourth quarter," relying on the fact that 'historical' defaults are still low and the economy is recovering (as if that's not priced in already). The worst hit segment of the junk market is CCCs and below - at 22-month lows - as Bernanke and Yellen forced investors ever further along the risk spectrum for yield. Of course, equity markets (Russell 2000 aside) have ignored much of this decline until recently, but the plunge in leveraged loan issuance suggests all that cheap-buy-back-funding is rapidly disappearing (even for the best credits and biggest names).

As Bloomberg reports,

High-yield bond investors worldwide have been hurt by the biggest quarterly losses in three years as geopolitical tensions and the threat of a U.S. interest-rate increase curbed risk appetite.

Speculative-grade notes forfeited 1.7% in the last three months, the most since the third quarter of 2011, according to Bank of America Merrill Lynch index data; the average yield on the debt climbed to a one-year high of 6.26% on Sept. 29, the data show

The junkiest of the junk was worst hit... after being driven to that insanity by The Fed...

And stocks are starting to catch on...

And issuance is plunging...

removing the buyback-funding that "fundamentals" need to engineer reality for stocks.