High Yield Morning Update

The Federal Reserve raised its benchmark lending rate yesterday, as was widely anticipated by the market, and reiterated guidance for two hikes this year while keeping the long term target unchanged. Markets responded favorably with all US risk assets gaining ground as investors remain optimistic about the economy. The yield-to-worst/spread on the Bank of America High-Yield Index tightened for the first time in 10 sessions closing the day at 6.07%/+402bps. The pace of issuance remained slow with just one deal priced for $375 million, taking the MTD total to 40 deals and $25.45 billion in proceeds. Despite the turn in sentiment yesterday, WTD retail mutual and exchange traded fund flow data still shows a massive outflow of over $4 billion Thursday through Tuesday. WTI gained over $1 yesterday as EIA data showed that crude, gasoline, and distillate stockpiles all dropped while the market had priced in a further gains. This morning, yesterday’s rally is extending as markets continue to gain ground after the Fed statement eased some of the recent tension. High-yield is opening well bid as investors reenter the market looking for bargain pricing after the 9 day slide in prices with energy leading the way as oil advances for a second day. Four new deals are slated to price this afternoon.

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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