No. Yields have indeed risen sharply over the past several months, but given the cyclical nature of the asset class, along with worrisome trends in issuance volume and quality, we still do not find them compelling.

We have long viewed high-yield debt as more tactical than most other asset classes, as cycles tend to be more extreme. In short, since companies issuing such debt tend to be low quality (i.e., in need of funds), rising yields create a vicious circle where it gets harder for companies to raise fresh capital, thus putting more pressure on their balance sheet, which makes investors demand higher yields, etc.

(Of course the same circle works in reverse, as we and many others have discussed over the past few years—namely, money has been so cheap and easily available that markets haven’t seen the sort of “creative destruction” that weeds out the weakest companies, which has rewarded those who bought such companies’ debt.)

In other words, rather than offering “sale prices” on an existing asset, falling prices for high-yield debt can lead—and often have led—to a snowballing effect where lower prices beget . . . even lower prices.

Standard & Poor’s (S&P), for example, recently noted that its “distress ratio”—the percentage of bonds trading at more than 10 ppts above comparable-duration US Treasuries—hit 15.7%, the highest since December 2011. While much of this is due to energy and mining concerns, spread widening has been generally uniform across sectors. And as S&P drily notes: “A rising distress ratio reflects an increased need for capital and is typically a precursor to more defaults when accompanied by a severe and sustained market disruption.”

Another reason for concern is the sheer volume of issuance over the past several years, coupled with a decline in issue quality. Consider: new issuance since 2009 (not quite seven years) has totaled $2.13 trillion, 20% more than was issued from 1985, when our data begin, through 2008 (i.e., 24 years). Issuance since 2013—$1.02 trillion in just under three years—has been 40% above the total for 2003 to 2007, five years of the most epic credit creation in history. The deterioration in quality, meanwhile, can perhaps be seen most clearly in the loan market, where “covenant-lite” deals have accounted for more than 60% of issuance since the beginning of 2013 (and more than 70% since the start of 2014); by contrast, this figure topped out at a mere 30% in the halcyon year of 2007.

Perhaps not surprisingly, the recent stabilization of the market has gone hand-in-hand with a surge in inflows. According to Lipper, investors put $3.3 billion into high-yield funds during the week ended October 21, the second highest amount in their post-1992 dataset (trailing only a week in October 2011). And some high-profile managers have said they believe markets are mispricing the risk of default, particularly in the battered energy sector.

They could certainly be right, and clearly the “lesson” of the past several years has been to buy every dip regardless of the validity of concerns/valuations. Some also point to the lack of a “maturity wall” as a positive—companies are unlikely to default until issues come due—although a recent GMO white paper did a pretty good job debunking this view. In their words: “At the three points in recent history when investors most needed a signal to sell credit, the maturity wall was telling investors not to worry.”

Finally, it is worth noting that some managers are adding small long (and/or short) positions with challenged/stressed/even distressed companies, particularly in the energy sector and Europe, which they admit are likely to be early, and even lose them a little money. But in our opinion this is sound strategy, as taking undersized positions gives them excellent information and perspective (and profit potential) on future market moves.

In sum, neither we nor anyone else knows whether the recent backup in high yield is yet another blip or the start of another credit cycle. But given the nature of the asset class, along with staggering issuance volumes and declining quality, we would counsel patience.

Eric Winig is a Managing Director on the Cambridge Associates Global Investment Research team.