CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were +$4.3 billion and year to date flows stand at $35.2 billion.  New issuance for the week was $4.4 billion and year to date issuance is at $224.7 billion.

(Bloomberg)  High Yield Market Highlights

• With 1.5% of returns, junk bonds are on their way to the biggest weekly gain since June 5. It also marks the fourth straight week of positive returns, the longest winning stretch since January.
• Investors have propelled the four-week rally as U.S. high-yield funds continued to report inflows. An influx of $4.3b for the week is the third consecutive period of incoming cash and the 10th biggest on record
• CCCs got a boost from the risk-on tone and are poised to post the biggest weekly gains in seven. With 1.64% returns, it’s the best asset class for the week in U.S. high yield. CCCs have outperformed BBs and single Bs which are expected to show gains of 1.52% and 1.46%, respectively
• CCCs would be outperforming BBs and single Bs for the second consecutive week
• Should the pace of the rally continue uninterrupted into next week, CCCs are set to outperform BBs and single Bs for the third straight month with 3.89% returns month- to-date
• Yields and spreads snapped a six-day rally and rose 4bps to 5.59% and +504bps, respectively, as equities dropped more than 1% and oil prices fell almost 2%
• Issuance slowed as earnings gained momentum with just three deals for $1.265b pricing on Thursday, taking the week’s volume to $4.4b and July to almost $19b
• Barclays strategist Bradley Rogoff cautions in a note Friday that the markets are now through year-end spread targets and the next five months will see “plenty of risks,” though strong technicals may help avoid a substantial selloff in the short run
• High-yield bonds with more than $81.4b outstanding are currently trading above upcoming call prices, making it attractive for issuers to redeem them in the next three months
• Junk bonds may pause ahead of the weekend as stock futures edged lower amid escalating tensions between the U.S. and China with the risk-off tone appearing to hold

(CNBC)  Senate GOP, White House reach tentative $1 trillion pact to break coronavirus aid logjam

• Senate Republicans announced Wednesday evening that they have “reached a fundamental agreement” with White House negotiators on how to move forward with a coronavirus relief bill.
• After the third meeting this week, Sens. Richard Shelby, R-Ala., chair of the Appropriations Committee; Lamar Alexander, R-Tenn., chair of the Health, Education, Labor and Pensions Committee; and Roy Blunt, R-Mo., chair of the Rules Committee, emerged from the negotiating room with Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows saying they are “completely on the same page” and “in good shape.”
• The tentative framework comes amid tension in the party over how to respond to the coronavirus pandemic, which is forcing states to re-evaluate their plans to reopen and to address the growing numbers of cases and deaths.
• The legislation remains fluid, and Senate Majority Leader Mitch McConnell, R-Ky., has indicated that he wants to keep the price tag at $1 trillion. Republicans aren’t all on the same page, as some have denounced the cost amid a soaring national debt. But the latest talks show some signs of breaking an intraparty logjam that has kept negotiations at a dead stop for weeks.
• The new proposal will serve as a starting point for negotiations with Democrats, who have passed a $3.4 trillion bill in the House and have been pressuring the GOP to move quickly on new aid as COVID-19 cases and deaths rise in the United States.
• Mnuchin told reporters Wednesday that negotiators agreed to provide Americans with another round of direct payments, which the administration has been pushing for weeks. The details, however, have yet to be settled upon.
• Asked whether there is a consensus on an amount, Mnuchin said, “I’m not going to get into specifics right now, but there is an agreement.”
• It isn’t clear at this point, however, whether the terms of the direct payments will mirror those of the initial package in March — which Democrats want in a future aid package.
• While Republicans spent most of Wednesday floating the idea of a short-term extension of enhanced unemployment insurance benefits, the White House seemed to cool to the proposal.
• “We’re really looking at trying to make sure that we have a comprehensive bill that deals with the issues,” Meadows told NBC News. “Any short-term extensions would defy the history of Congress, which would indicate that it would just be met with another short-term extension.”
• The $600-a-week federal payment for jobless Americans is set to run dry at the end of the month, and with no extension, it could lag until Republicans come to a broader consensus.
• And there was no agreement on a payroll tax cut, a top priority for the administration but for only a handful of Senate Republicans.
• “We really are not in a position to talk any specifics,” Meadows said. “We’re going let Leader McConnell talk about that after he actually has a more thorough conversation with his senators.”