High Yield Morning Update

High yield continued to pullback Wednesday with yields rising to a six-week high as oil struggled, equities fell for the sixth day in the past eight and the market continues to be flooded with new issue paper. The yield-to-worst/spread on the Bank of America High-Yield Index widened 10bps/6bps on the day to close at 5.89%/+379bps. Issuance continued its recent torrid pace yesterday with six deals pricing for $4.1 billion in proceeds, making it the second busiest issuance day since June. Issuers are rushing to the market to price deals ahead of what’s now almost certainly going to be a rate hike in March. Retail investors turned on the high-yield asset class quickly this week with outflows totaling $2.1 billion through Tuesday’s close. WTI closed at $50.28, down 5.38%. Treasuries headed for their longest losing streak in five years after an ADP report surpassed expectations all but assuring a rate hike for next month, with the yield on the US 10yr Treasury note widening 5bps to 2.56%, a new YTD high. This morning US risk markets are trading in the red again as oil prices fall below $50 as US shale producers continue to add production and a rate hike appears imminent. High yield is opening generically down ¼ – ½ of a point across the board while focus remains on a very busy new issue calendar and investor start to show signs of new issue fatigue.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.
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