High Yield Daily Update

High yield bonds are opening this new week a bit better in the secondary market even though some of the HY ETF’s are off a bit.  Three new-issues priced on Friday, all eight year notes with two rated BB- and the third B+.  Note the coupons on these look to be a tad higher than a few months ago.  There are 13 new-issue deals on the forward calendar with three slated for today.  High yield saw inflows on Friday to mutual and exchange traded funds the tune of +$519M and Lipper reported an outflow of roughly -$525M for the week ended March 7th, it’s the eighth consecutive week of exits, for a total outflow of -$16.6B over that period.1

Oil, Gold and Equities are all lower today while the 10-year Treasury yield is easing a bit to 2.88%.  We will keep an eye on this as the CPI and PPI are out tomorrow.  Some are forecasting the Fed will raise rates 3 – 4 times this year and thus moving the 10-year Treasury will settle just above 3%.  What strategies should investors utilize should that play out?  Click here to read our piece, “Strategies for Investing in a Rising Rate Environment,” where we look at just how the high yield market has historically performed in the face of rising rates over the past several decades.  We believe that high yield is up there in places to have an allocation during periods of rising rates, with its higher coupons and shorter average maturities than many other fixed income asset classes as two of the most compelling reasons.

1  Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 3/9/18, 3/13/18, https://markets.jpmorgan.com
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