High Yield Morning Update

High yield bonds were mixed on Friday depending on what industry you looked at.  For instance, rental car companies continue to be weak as Uber and Lyft keep taking passengers from them, while oil E&P, oil services, and related companies firmed up as oil gained for the week for the first time in a while.

Two new issues priced closing out a very slow month, the slowest since February of 2016.  The new-issue market was slow this month as there was a Fed meeting and many quarterly economic releases investors seemed to be waiting on, including the strong 2.6% GDP number that was released on Friday.  The longer end of the Treasury yield curve rose early in the week putting a squeeze on new-issues but has since eased.  The 10-year Treasury yield hit 2.37% earlier this month, but has since eased to 2.28% well off the YTD high of 2.67%.

We continue to see the pull between aging demographics around the world and a US government attempting to put forth growth initiatives, including tax reform.  We believe that near and long-term growth will be hard to come by anywhere in the world as you have less spenders as witnessed in the China’s 2Q GDP number coming in 7% while the second half is estimated at 6.4%.  In looking at the EU, everyone was happy because their 2Q CPI came in at 1.2% vs 1.1% estimate.

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