High yield bonds are up this morning on the back of the released North Korean hostages. The Bloomberg Barclays US Corporate High Yield index was up 0.02% yesterday.1 Helping overcome continued outflows from the asset class are higher equities, falling Treasury yields and oil that has spiked on Venezuela and Iran concerns. Two high yield bond new-issues priced yesterday for $2.7B in proceeds. Both deals were BB with a 5 3/8% and 5 3/4% coupon, translating to a current spread of 2.4% and 2.78% over the 10-year Treasury yield—no thanks. These sorts of coupons, and even lower, are representative of types of coupons often found for a number of credits within some of the passive high yield bond index ETFs. However, 65% of high yield new-issuance so far in 2018 is 144A-for-life securities2, which means that retail investors need to access these securities through ETFs and mutual funds versus holding individual bonds.
There is lots of economic news out of the BOE and US, but nothing we see as signaling any change in monetary policy. The US CPI came in light which could mean the US consumer could have a few extra pennies to spend. The number of people applying for US unemployment benefits came out this morning, keeping initial jobless claims near their 49 year low.