High yield weakness from last week is spilling over into this morning’s session as outflows from the two large index based exchange traded funds continue after Friday’s Payroll print increased the fear around a Fed rate hike in the June meeting, causing a spike up in Treasury yields. The EU bond buying program is underway today pushing the yield on the German 10yr note 5bps tighter to .32%, while US Fed rate hike concerns have pushed yields wider, creating German 10yr/US 10yr spread not seen since the 1980’s (185bps). While index products have seen a reversal in flows, active strategies have continue to attract steady inflow on top of what was an already above average cash balance for most managers, resulting in continued demand for new issue paper to help put money to work. Last week was the second busiest week of the year this far with just over $9 billion, and this week should see similar volume with a full calendar already.

Daily fund flow information sourced from J.P. Morgan.