High Yield Morning Update

US markets closed in red territory across the board yesterday as enthusiasm waned for the reflation trade that has been in place since the November election results, driving markets to record highs. The yield-to-worst/spread on the Bank of America High-Yield Index backed up for a second consecutive session this week to close at 6.02%/+404bps, off 4bps/7bps on the day. The yield on the index has risen 9 of the past 12 sessions. Issuance was steady yesterday with three deals pricing for $1.085 billion in proceeds after the onslaught of deals over the past several weeks ahead of the Fed’s rate hike. Oil prices plunged to a three-month low of $47.34, down 10 of the past 12 sessions as US stockpiles held steady. The yield on the US 10yr Treasury note closed at 2.42% vs 2.46% Monday, YTD high of 2.63% and low of 2.31%. Overnight, global equities moved lower as investors continue to question US lawmakers’ ability to enact pro-growth policies. S&P 500 futures look set to trade lower again, after a decline yesterday where the index fell more than 1% for the first time this year. Safe-haven government bonds continue to rally, while gold extends recent gains. High-yield bonds are opening with a quiet tone and lower along with other US risk assets, with energy related credits taking the brunt of the pain.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

This Week in High Yield

Over the last week, high-yield bond prices stumbled amid huge outflows from retail mutual and exchange traded funds, lackluster stocks and declining oil. Yields reached a YTD high, only to recover into the weekend as US treasuries rallied, oil bottomed, stocks turned and a record stretch of new issue supply subsided after Fed Chair Yellen’s statement helped calm the jittery market. The yield to worst on the Bank of America High-Yield Index (BAML) tightened 6bps over the past week to close at 5.95% while the spread tightened 2bps to close at +391bps on the move in treasuries. WTI closed at $48.78, down 0.6% on the week. The US 10yr note closed at 2.5% vs 2.57% last Friday and compared to a YTD low of 2.31% and high of 2.63%.

17-Mar Yield/Level Weekly Return/Change MTD Return/Change YTD Return/Change
BAML HY 5.95% 0.22% -0.93% 1.97%
BAML Spread 391 bps 2 bps 17 bps -30 bps
Dow 20,914.62 0.08% 0.61% 6.47%
S&P 500 2,378.25 0.28% 0.73% 6.72%
10yr treasury 2.50% -7 bps 11 bps 6 bps

 

Investors withdrew money from high-yield mutual and exchange traded funds at a record pace totaling $5.683 billion for the reporting week ended March 15, the biggest outflow since the week ended August 6, 2014 when the total was $7 billion. This was the third consecutive weekly outflow after last week’s $2.1 billion negative reading, pushing the total exodus to $8 billion over the two week span. The 2017 total outflow now stands at $6.4 billion. High-yield new issuance kept up the strong pace this past week with 15 deals pricing for $7.55 billion in proceeds, making it the fourth busiest week YTD. Issuers remained in a hurry to price deals amid unsteady oil and investor exodus as high-yield enthusiasm waned. March issuance volume to date is $30.65 billion, up 48% from last year while YTD volume of $69.71 billion is up 88% over last year’s pace.

The Bank of America Merrill Lynch High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. BAML HY represents the index yield for the designated date, while return/change represent the index return for the period ending date. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.  Fund flow data according to weekly reporters to Lipper for the week running Thursday to the following Wednesday.

High Yield Morning Update

High-yield bond prices rebounded sharply over the past two days, erasing more than a weeks’ worth of loses,  after the Fed’s statement calmed the jittery market, reiterating a gradual hike approach and lack of intention to raise over the next few meetings. The yield-to-worst/spread on the Bank of America High-Yield Index tightened 13bps/14bps yesterday to close at 5.94%/+388bps, down 24bps/17bps in the past two sessions. Issuance resumed in a big way yesterday as six issuers and seven tranches priced for $4 billion in proceeds. Oil rallied at the open but faded into the close to finish down 0.24% at $47.72. Lipper reported the second biggest outflow ever of $5.68b from mutual and exchange traded funds for the week ending 3/15 (reporting week Thursday to Wednesday), making the total outflow over the past two weeks $8 billion. Overnight EM headed for its best week in eight months, even as the global equities rally looked to take a breather. Oil prices are poised for their first weekly gain in March, while the USD is on its way towards its biggest weekly loss since February. High-yield is generally opening the day flat and quiet after what has been a volatile week as investors look forward to the weekend.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

High Yield Morning Update

The Federal Reserve raised its benchmark lending rate yesterday, as was widely anticipated by the market, and reiterated guidance for two hikes this year while keeping the long term target unchanged. Markets responded favorably with all US risk assets gaining ground as investors remain optimistic about the economy. The yield-to-worst/spread on the Bank of America High-Yield Index tightened for the first time in 10 sessions closing the day at 6.07%/+402bps. The pace of issuance remained slow with just one deal priced for $375 million, taking the MTD total to 40 deals and $25.45 billion in proceeds. Despite the turn in sentiment yesterday, WTD retail mutual and exchange traded fund flow data still shows a massive outflow of over $4 billion Thursday through Tuesday. WTI gained over $1 yesterday as EIA data showed that crude, gasoline, and distillate stockpiles all dropped while the market had priced in a further gains. This morning, yesterday’s rally is extending as markets continue to gain ground after the Fed statement eased some of the recent tension. High-yield is opening well bid as investors reenter the market looking for bargain pricing after the 9 day slide in prices with energy leading the way as oil advances for a second day. Four new deals are slated to price this afternoon.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

High Yield Morning Update

A heavy tone continued to drive the high yield market lower yesterday as the FOMC meetings got underway, with the yield-to-worst/spread on the Bank of America High-Yield Index pushing wider for the eighth straight session to close at 6.19%/+405bps, down 10bps/11bps on the day and 62bps/48bps since the slide began. It took a winter storm in NYC to pause the issuance activity with no new deals pricing yesterday, though MTD issuance stands at $25.075 billion making it the busiest month since September after last week’s record setting pace. Issuance spiked over the past couple weeks as the Fed hike talk moved sharply from a gradual hike in rates to a near certain hike this week as market expectations went from 32% on Feb 1st to 80% on March 1 and 100% on March 8. WTI closed at a three-month low of $47.72, down 1.4% on the day. Money continues to flow out of the high-yield market this week with an estimated $3 billion outflow WTD after last weeks $2.12 billion outflow (flows from mutual and exchange traded funds, reporting week runs Thursday to the following Wednesday). The 10yr Treasury note yield closed at 2.60% versus a 32-month high of 2.63% yesterday. This morning the market is bouncing as oil recovers from its recent slide and the market awaits the Fed decision this afternoon at 2PM ET.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

This Week in High Yield

Enthusiasm for the high-yield rally waned over the past week as issuers flooded the market with new deals ahead of this week’s Fed decision, while retail mutual and exchange traded funds reported the largest outflows of the year, equities lost ground and oil plunged to a 10-week low. The yield-to-worst/spread on the Bank of America High-Yield Index (BAML) widened 38bps/29 bps on the week quickly moving from 18-month lows to several month wides of 6.01%/+389bps.

10-Mar Yield/Level Weekly Return/Change MTD Return/Change YTD Return/Change
BAML HY 6.01% -1.22% -1.15% 1.74%
BAML Spread 389 bps 29 bps 15 bps -32 bps
Dow 20,902.98 -0.40% 0.53% 6.38%
S&P 500 2,372.6 -0.40% 0.45% 6.42%
10yr treasury 2.58% 10 bps 18 bps 13 bps

 

US retail mutual and exchange traded funds reported an outflow of $2.1 billion for the week ended March 8th, the largest weekly outflow from the asset class since the week ended Nov 16th of $2.3 billion.  This was the second consecutive week of outflows totaling just over $2.4 billion for the span. Year-to-date the market has seen outflows totaling $743 million. The issuance onslaught in high-yield land was relentless this week with 26 deals pricing for $17.55 billion in proceeds making it the busiest week of issuance on record, surpassing the previous record of $16.46 billion in September 2013.

The Bank of America Merrill Lynch High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. BAML HY represents the index yield for the designated date, while return/change represent the index return for the period ending date. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.  Fund flow data as reported by Lipper for the week running Thursday to the following Wednesday.

High Yield Morning Update

High yield moved lower for the sixth consecutive session yesterday pushing yields north of 6% for the first time in over two-months as oil continued to struggle and new issue paper continued to flood the market. The yield-to-worst/spread on the Bank of America High-Yield Index widened 13bps/9bps on the day to close at 6.02%/+388bps, off  45bps/31bps in just the past six trading days. The primary market was hammered with new issue paper for the third consecutive day as eight more deals for $6.65 billion priced, making it the busiest day for issuance since March 2015, as issuers continued to rush to market ahead of the Fed’s decision next week. Investors soured on the high-yield market last week as a Fed hike became near certainty, with retail funds reporting the largest outflow from the asset class since early November totaling $2.1 billion. Oil closed at its lowest level since November at $49.28, down from an 18-month high in just 10 trading days. Treasuries continued to lose ground extending their longest losing streak in five years as the yield on the 10yr Treasury note continued to edge higher closing at 2.61% this morning. US futures are bouncing a touch after what has been a tumultuous week with equity and oil futures pushing higher in early trading. The high-yield market is opening flat, taking a pause from the recent sell-off as investors survey the new landscape after the six-day slide. The forward calendar looks fairly quiet to start the day.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.  Fund flow data according to weekly reporters to Lipper for the week running Thursday to the following Wednesday.

High Yield Morning Update

High yield continued to pullback Wednesday with yields rising to a six-week high as oil struggled, equities fell for the sixth day in the past eight and the market continues to be flooded with new issue paper. The yield-to-worst/spread on the Bank of America High-Yield Index widened 10bps/6bps on the day to close at 5.89%/+379bps. Issuance continued its recent torrid pace yesterday with six deals pricing for $4.1 billion in proceeds, making it the second busiest issuance day since June. Issuers are rushing to the market to price deals ahead of what’s now almost certainly going to be a rate hike in March. Retail investors turned on the high-yield asset class quickly this week with outflows totaling $2.1 billion through Tuesday’s close. WTI closed at $50.28, down 5.38%. Treasuries headed for their longest losing streak in five years after an ADP report surpassed expectations all but assuring a rate hike for next month, with the yield on the US 10yr Treasury note widening 5bps to 2.56%, a new YTD high. This morning US risk markets are trading in the red again as oil prices fall below $50 as US shale producers continue to add production and a rate hike appears imminent. High yield is opening generically down ¼ – ½ of a point across the board while focus remains on a very busy new issue calendar and investor start to show signs of new issue fatigue.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

High Yield Morning Update

The high-yield market eased Monday to open the new week as yields rose from three-year lows and spreads widened from the tightest level in 30-months with supply gaining momentum and stocks slowing down. The yield-to-worst/spread on the Bank of America High-Yield Index widened 4bps/6bps on the day to close at 5.69%/+366bps.  The primary market ramped up the pace yesterday with six new deals being added to the forward calendar and three deals pricing for $1.3 billion in proceeds. New issues came from across the ratings spectrum and use of proceeds were all for refinancing/repaying debt other than one acquisition. WTI closed little changed at $53.20. Markets are little changed this morning as focus remains on earnings and a robust new issue calendar.

The Bank of America Merrill Lynch US High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.

This Week in High Yield

It was another strong week for US risk markets with high yield and spreads dropping to multi-year lows, while equity indices continue to notch new highs as the DJIA traded up in ten of the last 12 sessions to hit a new record high at Friday’s close. The yield-to-worst and spread on the Bank of America High-Yield Index (BAML) tightened 3bps and 24bps over the past week to close at 5.63% and +360 bps, respectively. CCC credits continued to outperform BBs and Single-B’s in this risk on environment generating YTD returns for the index of 5.57% for CCC rated credits versus 2.28% for BBs and 2.85% single-B’s.  WTI closed at $53.33, down 1.2% on the week after hitting an 18-month high of $54.45 last week. The US 10yr Treasury note closed with a yield of 2.48% versus a YTD low of 2.31% at the prior Friday’s close.

3-Mar Yield/Level Weekly Return/

Change

MTD Return/

Change

YTD Return/

Change

BAML HY 5.63% 0.32% 0.07% 3.00%
BAML Spread 360 bps -24 bps -14 bps -61 bps
Dow 21,005.71 0.94% 0.94% 6.81%
S&P 500 2,383.12 0.71% 0.85% 6.85%
10yr treasury 2.48% 17 bps 9 bps 3 bps

US retail mutual and exchange traded funds reported outflows from the high-yield asset class totaling $240 million for the week ended March 1st, just the first weekly outflow in the past five weeks. Since the November elections, the high-yield asset class has taken in $8.7 billion in net inflows. Issuance resumed in the high-yield market after a two-week stretch of light volume with nine deals for $5.5 billion in proceeds. The final tally for February was 36 deals for $20 billion in proceeds, and the year to date tally now stands at 82 deals for $44.61 billion in proceeds.

The Bank of America Merrill Lynch High Yield Index monitors the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.  Index data sourced from Bloomberg. BAML HY represents the index yield for the designated date, while return/change represent the index return for the period ending date. Yield referenced is the yield-to-worst and spread referenced is the spread-to-worst.  Ratings category returns were for the index for the YTD period ending 3/3/17.  WTI refers to West Texas Intermediate and DJIA refers to the Dow Jones Industrial Average.  Fund flow data according to weekly reporters to Lipper for the week running Thursday to the following Wednesday.