The high yield bond market has turned negative today as it is expected the Fed will hint at a rate hike next month in their release this morning. Even with a hike built in, the longer side of the yield curve is seeing lower yields. Economic data has been strong, but all eyes are on the wage number due out on Friday. Two other big announcements tomorrow will help decide which way the high yield market trades: the tax plan and the Fed Chair announcement.
Only one new-issue priced yesterday, while six are on the forward calendar. We expect that it will remain a bit slow until some earnings blackout periods end and we move beyond some of this week’s important announcements referenced above.
Regardless of what happens, many investors need some tangible yield into their portfolios, and we believe high yield corporate bonds can provide this yield. The Moody’s Liquidity Stress Index dropped to 2.8% mid-October, revisiting record lows of April 2013, which indicates to us the fundamentals in this market are healthy, but many prices and yields are not so healthy. With one of the big index-based high yield ETF’s printing a 4.96% 30-Day SEC yield for October1, we believe there is better yield to be had in an actively managed high yield strategy. For more, visit www.advisorshares.com/fund/hyld.