High Yield Daily Update

The Bloomberg Barclays US Corporate High Yield Index was up 0.09% yesterday* and high yield opened yet again a bit better, as I believe the steadiness of the 10-year Treasury yield holding right at this 2.95% level despite the Fed raising rates has calmed the market.  Even though the Fed raised its projection for four raises this year from three, the fact that the economic landscape and lower defaults projections from the ratings agencies is calming to high yield investors.  No high yield bond new-issues priced yesterday and there remains two on the forward calendar and two expected to price today.  Inflows into high yield bond mutual and exchange traded funds continued yesterday and we will see how the latest week ended up as Lipper reports after the close today.

Oil is up slightly today but Schlumberger’s profit warning spooked the market a bit as they said costs for getting rigs, personnel and equipment back up and running are higher than projected.  Combine this with lower oil prices of late and talk of a production increase by OPEC (1.8M bpb), here we are.

On the economic front, political fighting across European countries is causing an economic slowdown and has since made the ECB cut 2018 growth forecast to 2.1% from 2.4%.  Here at home, retail sales blew away estimates as tax refunds and lower tax bills helped fuel spending and this all added to increased consumer comfort.  Fuel costs were higher for the last reporting period, but oil has since come down so we will see if gasoline, jet fuel and diesel follow suit as those are often laggards.

* 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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