High Yield Morning Update

The high yield bond and loan markets got slapped around a bit yesterday as many high yield index-tracking ETF’s traded down through their 100 day moving averages.  Today is softer still, but with oil up $0.50 the pressure is easing off this sector.  It is estimated almost $1B came out of high yield bond ETF’s yesterday which would make it the third largest one day high yield ETF outflow on record.  JP Morgan reported that energy-related bonds accounted for 35% and 32% of trading volume on Wednesday and Tuesday.Oil remains a concern even though the announced storage numbers were more of a draw down than expected.

Moody’s Liquidity Stress Index slid to 3.7% as of mid-June, down from 4.2% in May, making it the lowest since November 2014, which reflects an open refinancing market for high yield issuers, generally healthy corporate balance sheets and much less commodity strain as many have restructured in one way or another.  No high yield new issues priced yesterday but there are a half dozen in the pipeline.  The 10-year Treasury yield continues its fall as it touched 2.14% again.

1 Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 6/22/17, https://markets.jpmorgan.com/?#research.na.high_yield
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