CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.6 billion and year to date flows stand at -$2.2 billion. New issuance for the week was $2.4 billion and year to date HY is at $133 billion.

(CNBC) Fed hikes interest rates despite declining inflation, sets plan for balance sheet reduction

• The Federal Reserve approved its second rate hike of 2017 even amid expectations that inflation is running well below the central bank’s target.
• In addition, the Fed provided more detail on how it will unwind its $4.5 trillion balance sheet, or portfolio of bonds that includes Treasurys, mortgage-backed securities and government agency debt.
• As financial markets had anticipated, the policymaking Federal Open Market Committee increased its benchmark target a quarter point. The new range will be 1 percent to 1.25 percent for a rate that currently is 0.91 percent.
• “The combination of a rate hike and shrinking the balance sheet equates to a tightening monetary policy at a time when inflation is lower than expected,” said Kathy Jones, senior fixed income strategist at Charles Schwab.

(Bloomberg) Yellen Doubles Down on Bet Hot Job Market Stokes Inflation

• Federal Reserve Chair Janet Yellen is pressing ahead with plans to normalize monetary policy, betting that the ongoing strength of the labor market will ultimately prevail over the recent weakness in inflation.
• In a press conference on Wednesday after the Fed raised interest rates for the second time in 2017, Yellen played down a softening of price pressures in the last few months and voiced confidence the central bank was on course to hit its 2 percent inflation goal.
• “It’s important not to overreact to a few readings, and data on inflation can be noisy,” she told reporters.
• “The risk is that the Fed is too complacent on inflation and more than just transitory factors are keeping it from rising, and that the Fed is too confident about labor market improvement transitioning to wages and inflation,” said Michael Gapen, chief U.S. economist at Barclays Plc in New York.

(Modern Healthcare) CHS fires CEO of dissident Fort Wayne hospitals

• Brian Bauer, the CEO of Community Health System’s Fort Wayne hospitals, has been fired in the wake of a failed physician effort to find a buyer for the eight hospitals.
• The removal is the latest sign of trouble in the most profitable market for CHS, which has been facing hard financial times itself.
• Bauer was removed Monday as CEO of Lutheran Health Network because “current circumstances put him in an untenable position and he is unable to continue in his leadership role,” CHS Division 1 President of Operations Marty Bonick said in a letter to physicians and employees.
• Bauer’s ouster comes three weeks after Franklin, Tenn.-based CHS rejected a $2.4 billion offer from a buyout group that disgruntled physicians in Fort Wayne had brought forward to buy the profitable CHS division. More than 100 physicians supported the buyout effort.
• The physicians said in an editorial Sunday that Bauer had been put in “an untenable position” by advocating for staffing and facilities improvements that were largely ignored by CHS and gave rise to the buyout effort.
• “While this is precisely what leaders must do, it has led to Brian’s being criticized at a time when he should be praised for having the courage to say what needs to be said,” said the members of the physician group known as Fort Wayne Physicians.
• Bauer’s removal has heightened tensions in Fort Wayne, CHS’s most-profitable market, said Dr. John Crawford, a Fort Wayne city councilman who runs an anesthesiology practice in Fort Wayne that practices at the Lutheran network hospitals, rival Parkview Health and other facilities in town.
• “If you wanted a revolution rather than a resolution, this (Bauer’s firing) was the way to do it,” Crawford said.

(Business Wire) Frontier Communications Announces Cash Tender Offers for up to $800 Million Aggregate Maximum Consideration for Certain Series of Notes

• Frontier Communications Corporation announced that it has commenced tender offers to purchase for cash certain series of its senior notes up to an amount such that the maximum aggregate consideration (excluding accrued interest) paid by the Company in the Tender Offers does not exceed $800,000,000, subject to the Acceptance Priority Levels and the Acceptance Sublimits.
• The Tender Offers are intended to address maturities and reduce the Company’s current overall interest expense. The Tender Offers will be funded by the Company from borrowings under a new term loan B facility under its senior credit agreement, which the Company expects to enter into prior to the Early Settlement Date.