This Week in High Yield

It was another strong week for US risk markets with high yield and spreads dropping to multi-year lows, while equity indices continue to notch new highs as the DJIA traded up in ten of the last 12 sessions to hit a new record high at Friday’s close. The yield-to-worst and spread on the Bank of America High-Yield Index (BAML) tightened 3bps and 24bps over the past week to close at 5.63% and +360 bps, respectively. CCC credits continued to outperform BBs and Single-B’s in this risk on environment generating YTD returns for the index of 5.57% for CCC rated credits versus 2.28% for BBs and 2.85% single-B’s.  WTI closed at $53.33, down 1.2% on the week after hitting an 18-month high of $54.45 last week. The US 10yr Treasury note closed with a yield of 2.48% versus a YTD low of 2.31% at the prior Friday’s close.

3-Mar Yield/Level Weekly Return/

Change

MTD Return/

Change

YTD Return/

Change

BAML HY 5.63% 0.32% 0.07% 3.00%
BAML Spread 360 bps -24 bps -14 bps -61 bps
Dow 21,005.71 0.94% 0.94% 6.81%
S&P 500 2,383.12 0.71% 0.85% 6.85%
10yr treasury 2.48% 17 bps 9 bps 3 bps

US retail mutual and exchange traded funds reported outflows from the high-yield asset class totaling $240 million for the week ended March 1st, just the first weekly outflow in the past five weeks. Since the November elections, the high-yield asset class has taken in $8.7 billion in net inflows. Issuance resumed in the high-yield market after a two-week stretch of light volume with nine deals for $5.5 billion in proceeds. The final tally for February was 36 deals for $20 billion in proceeds, and the year to date tally now stands at 82 deals for $44.61 billion in proceeds.

The Bank of America Merrill Lynch 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. BAML HY represents the index yield for the designated date, while return/change represent the index return for the period ending date. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.  Ratings category returns were for the index for the YTD period ending 3/3/17.  WTI refers to West Texas Intermediate and DJIA refers to the Dow Jones Industrial Average.  Fund flow data according to weekly reporters to Lipper for the week running Thursday to the following Wednesday.
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