Inflows Rose while Yields on High-Yield Bonds Fell
Junk Bond Issuance Surged on Improved Secondary Market Sentiment
Investor flows in high-yield bond funds
Investor flows in high-yield bond funds were positive for the fifth consecutive week up to November 4. According to data from Lipper, net inflows into high-yield bond funds totaled $2.1 billion in the week ended November 4 compared to net inflows of $2.0 billion in the week ended October 28. With these large inflows, high-yield bond funds witnessed inflows to the tune of $3.7 billion on a year-to-date (or YTD) basis.
Analysis of yields and spreads
The yields on high-yield debt rose while spreads between high-yield debt and Treasuries fell over the week ended November 6.
High-yield debt yields, as represented by the BofA Merrill Lynch US High Yield Master II Effective Yield, rose 16 basis points from a week ago to 7.6%. Unlike yields, OAS (Option-Adjusted Spread) fell in the week. The BofA Merrill Lynch US High Yield Master II OAS fell six basis points from last week to end at 5.8% on November 6.
Returns on high-yield debt indexes and ETFs
Bond yields and prices move in opposite directions. With yields rising, return on high-yield bonds fell in the week ended November 6. The BofA Merrill Lynch US High Yield Master II Index fell 0.4% over the week. Returns in 2015 remained negative, with the index falling by 0.25% until November 6.
Popular ETFs that provide exposure to high-yield debt also fell over the week ended November 6. Prices of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), the PowerShares Fundamental High Yield Corporate Bond ETF (PHB), and the SPDR Barclays High Yield Bond ETF (JNK) fell 1.2%, 0.4%, and 0.3%, respectively.
In primary market issuance, First Data Corporation (FDC), the subsidiary of Charter Communications (CHTR) CCOH Safari, T-Mobile (TMUS), and Goodyear Tire & Rubber (GT) were among the major issuers. You can read more about the primary market activity in the third part of this series.
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