High yield bonds are opening a touch weaker today again following the equity market’s lead. It seems pretty tame to me given that it looks like missiles will be flying in the coming hours. Oil and gold are trading higher on the President’s tweet that this was imminent.
Following the CPI numbers this morning the Treasury curve continued on its flattening pattern as the 10-year Treasury yield eases to 2.78%. There is a 10-year auction today so let’s see where this prices and what the demand is.
There has been a lot of talk about all of the covenant-lite loans that have come to market in recent years and investors have struggled to push back on weaker covenant trends until recently, as many private equity backed deals have come to the loan market and CLO (collateralize loan obligation) issuance has been at record levels and needs to fill that loan demand, with managers of CLO’s seemingly focused more on gathering assets than pushing back on covenants. The prior “Cash America” ruling has set precedence for managers/investors to seek a “make whole” if companies “voluntarily” violate the indenture. This is an example of something active managers would watch but passive/index chasers may not.