The high yield bond and loan markets are slightly better today in anticipation of a busy week. The markets finished flat last week even though the longer dated Treasury yields rose. High yield issuance surpassed $29B in October, the largest October since the financial crisis, and we believe this strong issuance is good for active managers like Peritus as there is plenty of inventory to choose from. News items out this week that may impact the high yield market include US Treasury yields being down modestly (10yr at 2.39% or 9bp below last week’s high), a possible Fed chair announcement, a House tax bill, inflation data released (US ECI and PCE, EU CPI), central bank decisions (BoJ, FOMC, BoE), and US non-farm payrolls on Friday.
While rates have moved up over the past few months, the percentage of the JP Morgan Loan Index trading above par stands at 74.7%1, exceeding the high reached in early August. We believe it is not time to be reaching aggressively for yield, but we also don’t see many of the low yielding indexes and index-based products as reflective of some of the yield the high yield market has to offer; rather we believe that focus should be on a more concentrated portfolio with attractive credits that can provide above average tangible yield and YTW.