CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were +$1.0 billion and year to date flows stand at $36.2 billion.  New issuance for the week was $5.7 billion and year to date issuance is at $230.4 billion.

(Bloomberg)  High Yield Market Highlights

• S. junk bonds yields are on track for the biggest monthly decline on record at 5.41%, according to data compiled by Bloomberg.
• Junk has returned 4.5% in July, the most for any month since April, the data show. A slower pace of issuance in July of around $25b and robust inflows have helped drive yields down
• Technicals should remain supportive, Barclays Plc strategists led by Brad Rogoff wrote in a note Friday
• Funds that invest in high-yield bonds saw inflows for the third straight week
• The calendar for Friday is likely to be light. Leviathan Bond and Western Global Airlines are marketing deals that are scheduled to price next week
• High-yield bonds with more than $93.9b outstanding are trading above upcoming call prices, making it attractive for issuers to redeem the securities in the next three months
• CCCs accounted for about a third of the week’s volume, according to data compiled by Bloomberg
• G-III Apparel group also priced a $400m deal at the tight end of talk after receiving orders of more than $900m
• Junk bond spreads closed at a five-month low of 491bps more than Treasuries. Yields fell to 5.41%, also a five-month low

(CNBC)  Fed holds rates steady, says economic growth is ‘well below’ pre-pandemic level

• The Federal Reserve held interest rates steady in a decision announced Wednesday that came along with a tepid outlook on the coronavirus-plagued economy.
• In a move widely expected, the central bank kept its benchmark overnight lending rate anchored near zero, where it has been since March 15 in the early days of the pandemic.
• Along with keeping rates low, the Federal Open Market Committee, which sets monetary policy, expressed its commitment to maintain its bond purchases and the array of lending and liquidity programs also associated with the virus response.
• “We are committed to using our full range of tools to support our economy in this challenging environment,” Fed Chairman Jerome Powell said.
• The post-meeting statement labeled the current state of growth as better than it was at the trough but still not up to par.
• “Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the statement said. “Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
• Markets reacted little to the news, with stocks mostly holding earlier gains and government bond yields mixed.
• “In short, this is a holding operation, pending developments with both the virus itself and fiscal policy,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
• Officially, the FOMC kept its rate targeted in a range between 0%-0.25%, where it last was during the Great Recession. The statement said the rate would stay there until officials are “confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
• “The path of the economy will depend significantly on the course of the virus,” the statement said.
• “It’s just such an important sentence, we decided it needed to be in our post-meeting statement,” Powell added during his post-meeting news conference. “It’s so fundamental.”