High yield bonds have turned negative with equities despite oil, gold and Treasuries on the rise. Flows were two way yesterday with high yield index ETF’s taking in a positive flow while high yield active mutual funds saw an outflow. Dovish talk from our Fed and from the EU is dragging stocks lower. As we enter the last two weeks of summer it should remain pretty quiet as most companies have announced earnings, the government is on recess again and the new-issue market will be quiet if history repeats itself.
Despite what some are saying about the high yield bond and loan markets, these markets still are generating higher yields than many other fixed income alternatives. Additionally, while volatility is still present in individual securities and we believe that some securities are overpriced, we believe active managers have the ability to determine where there is value and what is a value trap in this market.