High yield bonds are a bit weaker today on a higher 10-Year Treasury yield, touching 2.95%, which is a four year high. Debate rages on about how many hikes the Fed will undertake this year after their minutes came out yesterday, but some Fed Governors are talking about a more gradual rate move as they claim inflation is “running a little behind target.” There were four more new-issues that came to the market for $1.5B and another half dozen in the on deck.
Small inflows have reversed a few weeks of big outflows. The JNK and HYG ETFs are now seeing flat activity after losing approximately 37% and 17% of their asset base since Jan 8th.1
It doesn’t seem like much has changed in the high yield secondary market over the past few months but according to JP Morgan, BB-rated bond yields in their index bottomed in Oct at 4.09% and are now 4.94%. Also of note, currently $101bn (8%) of US high yield bonds yield less than 4%, down from $393bn (32%) in Oct.1
1 Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 2/22/18, https://markets.jpmorgan.com.