Why Was High-Yield Bond Issuance Slow Last Week?
Why Was Junk Bond Issuance Mild Last Week?
Deals and flows analysis in high-yield bond markets
High-yield bond issuance activity slowed down last week. However, the tone of the Market remained firm. According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $3.8 billion was issued in the week ending May 6—the lowest since March 25, 2016. In the previous week, high-yield issuance was at $6.3 billion. The number of transactions was down to five last week from seven in the previous week.
Last week brought the total US dollar-denominated issuance of high-yield debt to $66.5 billion in 2016 year-to-date. This is 47.0% lower compared to the same period in 2015.
Mutual funds like the PIMCO High Yield Fund – Class A (PHDAX) and the Fidelity High Income Fund (SPHIX) invest in junk bonds. PHDAX’s holdings include Citigroup (C) and Lloyds Banking Group (LYG). SPHIX holds junk bonds of Tenet Healthcare (THC) and Tronox Worldwide LLC—a subsidiary of Tronox Limited (TROX).
High-yield debt is tracked by ETFs like the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).
Purpose of the deals
Five deals were priced last week—four for refinancing and one for general corporate purposes.
Hanesbrands (HBI), U.S. Steel (X), PTC (PTC), and Mobile Mini (MINI) issued junk bonds for refinancing purposes.
Meanwhile, Vector Group (VGR) issued junk bonds for general corporate purposes.
In the next part, we’ll analyze the deals priced last week as well as pricing trends.
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