You've got to admire Peter Briger's honesty.

Briger, co-chairman of Fortress Investment Group, is so unhappywith the current state of credit markets that he's prepared to giveinvestors their cash back rather than try to find somethingworthwhile to buy. Why? Because the credit-investing landscape isjust that bleak right now.

“We are in a period of time where the opportunity set is low,”Briger said on an earnings call Thursday. “We're really tryingnot to make marginal mediocre investments.”

It's easy to see why the $70 billion asset manager is having ahard time getting excited about riskier debt markets right now.Prices are high. Yields are low. Companies are becoming lesscreditworthy. Uncertainty abounds.

Recently, investors have demonstrated a bout of fear, yankingabout $4billion from U.S. high-yield bond funds in the past week, themost so far this year. This may be largely due to jitters tied tothe upcoming U.S. election, which takes place on Nov. 8. But oncethe election is over, there's a good chance lower-rated corporatebonds will continue to decline.

Here are three reasons why:

1. Many opportunistic buyers aren't interested in buying the debtat such high prices. Fortress is a good example ofthis. Briger's most positive comment in the firm's earningscall was predicting another downturn, which could lead to somedeals. “I guess the best that can be said is that the seeds of thenext great opportunity are being planted now,” he said. Fortressisn't alone: KKR is selling distressed debt it purchased earlier inthe year to lock in gains, and behemoths like Oaktree and BainCapital are saving up cash to deploy in aslump.
2. One of the biggest drivers of this year's gains has been energyjunk bonds. But that trade appears to be coming to an end. Oilprices have plunged more than 13 percent in less than three weeks,bringing down speculative-grade debt of energy companies withthem.
3. Meanwhile, bond traders are starting to believe ininflation again. So are Fed members, who said this week that thepace of price increases “has increased somewhat since earlier thisyear.” As if to hammer home the point, Friday's U.S. jobs report showed that wages rose from a year earlier bythe most since June 2009.

Why does this matter for riskier corporate credit? The moreinvestors believe in inflation, the less they'll be willing to parktheir money in government bonds that provide less income than therate that consumer prices are rising. That means that borrowingcosts will probably rise on more highly-rated debt, with thosenotes attracting investors who are currently taking bigger risks onlower-grade credit.

While many traders are blaming political uncertainty for thelatest selloff in riskier credit, there are fundamental reasons forthis debt to continue deteriorating. Don't be surprised if it doesjust that through the end of the year.

This column does not necessarily reflect the opinion ofBloomberg LP and its owners.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.