High yield bonds were firmer yesterday as demand continues to outpace supply by approximately three times. Four new-issues priced yesterday for $1.5B in proceeds, with another half dozen on the forward calendar.
Long maturity Treasury yields continue their steady climb with the 10-year pushing through its 200-DMA and the 2-year touched its highest level since November of 2008. With this action happening in Treasuries, we are seeing some inflows into floating rate loans.
Consumer Comfort numbers increased for the first time in four weeks, while Q2 GDP was finalized at a 3.1% clip. Expectations are for a dip in Q3 GDP on the back of the hurricanes and uncertainty in Washington, DC.
The risk spread over US Treasuries for BB rated US corporate bonds tightened to 211bp on Wednesday, the lowest level since the 2008 Financial Crisis, according to Bank of America Merrill Lynch data. We believe this is why you can’t sit in a static beta index product. Yes it’s lower cost, but we believe this is an environment in which you will get what you pay for. We believe proven, active managers, such as Peritus, can benefit during this environment.