CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were +$1.6 billion and year to date flows stand at -$0.1 billion.  New issuance for the week was $7.0 billion and year to date issuance is at $105.6 billion.

(Bloomberg)  High Yield Market Highlights

• S. junk bonds are poised to start weaker after coming off the best month for returns since January 2019 with gains of 4.5%. Stock futures are lower on concern of lasting pain from the pandemic after weak corporate earnings and economic data.
• Del Monte Foods is expected to kick off issuance in May. It’s mulling an increase in the size of its five-year offering to $700m from $500m after investors piled orders into the deal
• Other potential issuers could stay on the sidelines if the market tone stays weak.
• Issuance in April topped $37.3b to make it the busiest month of the year, according to data compiled by Bloomberg.
• Junk bond investors poured more cash into the asset class for the week. This was the fifth straight week of inflows, with confidence buoyed by a pledge by the Federal Reserve to buy some speculative-grade debt
• Junk bond spreads declined 14bps to +744bps, while yields dropped 13bps to 8.05% on Thursday even as the S&P 500 fell
• High yield gained for the third consecutive session with returns of 0.39% and 4.5% for the month
• Single-B spreads and yields fell 11bps to +748bps and 8.09%, respectively, and posted gains of 0.4%. Single-Bs were the best performing across junk rating tiers Thursday
• CAA yields fell 9bps to 14.84% and spreads were down 15bps to +1,437bps. The index ended an eight-day losing streak to post a gain of 0.36%

(Wall Street Journal)  U.S. Car Makers Pencil In May 18 As Manufacturing Restart Date 

• Detroit’s car companies are targeting May 18 to resume some production at their U.S. factories after the companies shut down their plants in March amid the spread of the coronavirus, according to people familiar with the plans.
• Executives from General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV in recent days tentatively settled on the timeline after talks with United Auto Workers leaders and Michigan Gov. Gretchen Whitmer’s office, the people said.
• The UAW last week expressed concern that reopening factories early next month — as earlier target dates had called for — wouldn’t provide enough time to develop safety protocols to protect workers from the risk of infection.
• The companies continue to work with the union on drawing up safety protocols for reducing exposure risk for workers and have made progress in recent days, although they haven’t completed those terms, the people said. A UAW spokesman declined to comment.
• A Ford spokeswoman said the company hasn’t decided when it will restart North American factories. “We are continuing to assess public health conditions, government guidelines and supplier readiness to determine when the time is right to resume production,” she said.
• Last week, Ms. Whitmer extended an executive order closing the state’s nonessential businesses through May 15 to combat the state’s outbreak.
• The May 18 start date would apply to all of the Detroit companies’ U.S. factories, even in states where stay-at-home orders are lifting sooner, the people familiar with the discussions said.
• The timing would allow the auto makers to complete safety protocols with the UAW and give parts suppliers more time to prepare shipments, the people said.

(Bloomberg)  Powell Says More Action Needed to Shield U.S. Economy From Virus

• Federal Reserve Chairman Jerome Powell urged lawmakers to deliver more fiscal stimulus to shield the U.S. economy from the coronavirus as he warned of a weak recovery even once the pandemic passes.
• “Economic activity will likely drop at an unprecedented rate in the second quarter,” Powell told a video press conference Wednesday. “It may well be the case that the economy will need more support from all of us, if the recovery is to be a robust one.”
• The Federal Open Market Committee held interest rates near zero and said in a unanimous statement that it “will use its tools and act as appropriate to support the economy.” Officials also cautioned the pandemic would weigh on the economy over the medium term. Data earlier on Wednesday showed the economy had already shrunk in the first quarter at the fastest pace since 2008.
• “Both the depth and length of the economic downturn are extraordinarily uncertain and will depend in large part on how quickly the virus is brought under control,” Powell told reporters, playing down the prospects for a quick, v-shaped recovery and noting the severe effects of the lock-down that has brought the economy to an “abrupt halt.”
• The central bank’s Board of Governors has also announced nine lending programs, pledging to make funds available to banks, companies and municipalities in an unprecedented use of the Fed’s emergency powers. Only four of the facilities are up and running with no set time frame yet for those remaining to become operational — including those aimed at Main Street.