Cheap debt, which has enabled leveraged buyouts to account for a fifth of mergers and aquisition activity in a boom expected to hit $5 trillion (€3.6 trillion) this year, is finally drying up, according to one of the world's most highly regarded investment managers.

Bill Gross, chief investment officer of fund manager Pimco, said yields on high-yield debt have risen over the last six weeks by as much as 150 basis points, which is far higher and faster than the US Federal Reserve has increased short-term interest rates in the past.