It's time for investors to PIK their steps carefully. Payment-in-kind bonds came to symbolise pre-crisis credit-market excess. Now these controversial, high-yielding instruments, which accrue interest rather than paying cash coupons, are re-emerging in Europe, with two deals in the space of a week. Blame it on the global search for yield: further risky PIK issuance most likely lies ahead.

PIK bonds are typically a sign of a frothy market. In return for a high yield, investors agree to be deeply subordinated to existing debt and accept long maturities. The two European deals, from Swedish cable operator Com Hem and UK real-estate company Annington, were priced to yield 13%. But if a company leaves PIK debt outstanding too long, it risks being sunk by the ballooning cost of repayment. In the US, private-equity-backed companies have issued a string of PIK deals in recent months to pay dividends - but at the cost of increasing debt burdens and reducing credit quality.