High Yield Morning Update

High yield bonds finished flat yesterday, as index-tracking ETF’s has small outflows, while active funds had inflows.  Three new-issues came to market yesterday for $2B in proceeds and there are seven deals on forward calendar with only one pricing today.  It could be one of the busiest Marches after today’s CPI release was in line and the 10-year Treasury yield eased to 2.85%.  Companies may well look to take advantage of the fact that these rates have stopped climbing.  Moody’s predicts the global speculative grade default rate will fall to 1.7% by the end of 2018 from 2.9% in 2017.  We believe a strong global economy and declining default rates bode well for the high yield market going forward.

Equities are mixed as oil slides and gold and silver continue to climb. One concern in the US economy as we see rising mortgage rates is summed up best by the Chief Economist from the MBA (Mortgage Bankers Association) where he states that US home prices are moving higher twice as fast as personal income.  Fewer are able to build equity in their home, something that has been a staple for generations, which may ultimately put more pressure on pensions and social security income.

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