High yield is better on this Friday the 13th; I can’t wait to binge watch some of those old classic scary movies tonight. The week has progressively improved in both bonds and loans as the outflows in bonds reversed and money came back into the market. Lipper reported an inflow of +$989M for US high yield bond mutual and exchange traded funds and +$443M for US loan mutual and exchange traded funds, both for the week ending April 10th. This is only the second inflow in thirteen weeks for bonds.
Over the last month, U.S. borrowers issuing leverage loans rated BB– or BB have priced to yield an average of 4.51%. That’s up from 4.23% in March and 3.88% at the end of 2017 as LIBOR has steadily increased so far this year. The amount of the J.P. Morgan Leveraged Loan index which trades above par stands at an elevated 72.3%.1 If you are an active manager you can potentially take advantage of these changes and sell higher priced holdings and redeploy those proceeds in lower priced, higher coupon securities.
Only two high yield bond new-issues priced yesterday for $650M in proceeds, leaving seven deals on the forward calendar. The primary market will be patchy as we enter earning season and companies have black-out periods.
1 Jantzen, Nelson, CFA and Peter Acciavatti, “JPM High-Yield and Leverage Loan Morning Intelligence,” J.P. Morgan North American Credit Research, 4/13/18, https://markets.jpmorgan.com. The J.P. Morgan Leveraged Loan Index is designed to mirror the investible universe of USD institutional leveraged loan market.