More confidence in a European resolution, easing double-dip fears on some better than expected economic data, and record inflows helped push the high yield market higher this week. Spreads and yields on the Bank of America Master High Yield Index tightened 43bps to 746bps and 46bps to 8.73%, respectively, while returning 1.88% for the week. Since hitting a recent wide of 910bps on spreads and 10.13% on yields on 10/4, the high yield index has returned 6.13% and tightened 164bps in spread and 140bps in yield over the two week period. Leading the charge higher has been the CCC index returning 9.59% since October 4^th after being beaten up in August and September returning -7.63% and -6.88%, respectively.¹

High Yield bond exchange traded and mutual funds reported the second largest weekly inflow on record this week of $2.3 billion which is equal to 2% of reported assets in the high yield space. This marks the sixth inflow in the last seven weeks and brings the year-to-date total inflow to $3.6 billion. As an asset class, the high yield space has experienced 11 straight days of inflows in to the market. Despite the new cash, the primary market remains subdued with only two deals pricing this week for a total of $600mm.

The buy side intensity seemed to pick up every day this week as the continued inflow coupled with the renewed enthusiasm toward the high yield market made offers increasingly hard to come by… amazing what a difference a couple weeks makes! While we have come a long way in a short time, it seems the path of least resistance right now continues to be tighter for the high yield market.

¹ Data for the Bank of America Merrill Lynch Master High Yield Index sourced from Bloomberg.