The Bloomberg Barclays US High Yield Corporate index was down -0.03% yesterday and the high yield secondary bond market is flat today, but there is a bid under ETF’s. The market is doing very well despite continued outflows, rising long maturity Treasury yields and a stronger dollar. Brent Crude hit $80 for the first time since 2014 and WTI is holding in here at $72. EIA Crude storage was down for the second week in a row and so was gasoline, which is not good heading into driving season that kicks off with Memorial weekend.
No high yield bond new-issues priced yesterday leaving eight on the forward calendar. With a lack of supply of new-issues, combined with low default rates and good corporate earnings, we expect that the high yield secondary market will continue to do well. The second half of the year will bring some large new-issues in the M&A space so we will see how the market likes them. High yield floating rate loans are flat again today as the market is looking at allocations that includes more than 50 deals before month end.
Keep an eye out for GDP growth, or lack of around the world. Is the US an outlier? After eight straight quarters of growth, Japan’s GDP contracted in the first quarter, by an annualized rate of 0.6% quarter over quarter. Many developed countries still have an easing monetary policy unlike the US’s tightening.
We believe that for all of these uncertainties, you need an active manager like the Peritus team that has been managing through cycles for a few decades.