High Yield Daily Update

The high yield bond market has opened a bit better today riding steady Treasury yields, higher equities and higher oil.  The Bloomberg Barclays US Corporate High Yield Index was up 0.05% on Friday.*  High yield bond mutual and exchange traded funds inflows continued on Friday but secondary trading volume continues to be below average, which smells like lower volatility.  We believe there shouldn’t be a lot of volatility if you look at the economy, corporate health and the market from a macro standpoint.  All of those things point to a healthy environment so we see buy and hold strategies playing out.

Oil here at $70, last seen in November of 2014, has kept a bid under oil related credits.  Higher oil is being fueled by the speculation that President Trump will pull out of the Iran deal and thus cutting their ability to export oil. Natural gas is weaker today following the EIA storage report last week that was bigger than estimated.

Eleven high yield bond new-issues priced last week for $4B in proceeds and there are a handful on the forward calendar, which should build as the week goes on as we exit earnings blackout season.  The breakdown of ratings from last week’s issuance was BB at, 19%, B+ at 59%, and CCC at 12% of issuance.  The year to date new-issuance volume is down ~18% from last year, as Treasury rates are higher thus less financial incentive to refinance existing debt.

* Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt (source Barclays Capital).
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