High yield bonds are weaker today along with equities, despite the 10-year Treasury yield easing to 2.81%, down from 2.95% seen just last week. It is amazing how fast these moves happen, as early in my career it used to take months to move Treasuries this far. The new-issue market has been quiet this week with only two issuers having brought a small issue each. There are only four on the forward calendar as the Fed meeting and volatility in equities and Treasuries have kept issuers on the sideline. I would expect a bunch to line up for next week with the 10-year Treasury yield falling, making it now cheaper for issuers of debt.
Oil is back below $65 and crude oil storage is below the five year average for the first time since 2014. OPEC’s production cut goal was to get storage below this five year average and they have achieved this. As per the US’s domestic production, crude oil imports were down and exports were up. US production was up 26,000 bpd compared to last week to an all-time record in the latest EIA reporting.
High yield has held in very well despite continuing outflows from the asset class. It is expected that another ~$1B has left high yield bond mutual and exchange traded funds in the latest reporting week, we will find out the actual number after the close today. High yield bonds have seen outflows in seven of the last eight weeks and with this week’s outflow, it will make it eight out of nine.