The Bloomberg Barclays US High Yield Index was up 0.05% on Friday,* but high yield bonds are opening weaker to start this new quarter with the larger on the run names bearing most of the downside.
There should be lots of fireworks this week literally and figuratively as tariffs go into effecting at different times through the week and Independence Day is on hump day, where we’ll get bar-b-ques and booms in the sky. The Asian markets were lower today going into these continued trade tensions and it appears to be risk off everywhere else, as equities are down and there is a small bid in longer Treasuries as those yields continue to drift lower. The US dollar continues to strengthen while Merkel’s/Germany’s issues continue to weaken the Eurozone markets and euro currency.
Last week was one of the busiest since March for high yield bond new-issues with over $7B pricing all the while the equity markets were down and the VIX was up significantly. Volume in new-issues are still trailing last year by ~23%. With the high yield index spreads widening out over the last week, we believe this could create an opportunity to add some good quality paper at a discount for active managers.
* Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt (source Barclays Capital).