CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were +$3.8 billion and year to date flows stand at $40.1 billion.  New issuance for the week was $17.8 billion and year to date issuance is at $248.3 billion.

(Bloomberg)  High Yield Market Highlights

• Borrowers are hitting the high-yield market in droves to refinance at some of the cheapest rates ever amid billions of inflows into mutual funds and ETFs.
• Investors poured almost $4 billion of cash into funds that buy U.S. high- yield debt during the week. That marks the eighth highest inflow for the asset class.
• “We expect strong technicals to prevail in the near-term, making a substantial sell-off unlikely,” Barclays Plc strategists led by Brad Rogoff wrote on Friday
• Year-to-date combined inflows of almost $40 billion from mutual funds and ETFs represents the highest annual inflow amount on record.
• Not every deal is flying off the shelf though. Western Global Airlines is said to have boosted the yield on its proposed $410m offering to 10.75% in a sign of tepid demand from investors
• Junk bonds are set to end the week with gains of 0.52%, the sixth consecutive week of positive returns and the longest winning streak since January
• Four deals for $3.7b priced Thursday to take the week’s volume to almost $18 billion, the most since mid-June and the second busiest week on record, according to data compiled by Bloomberg
• Issuance has been driven by refinancings, mostly from borrowers in the BB ratings band, with several selling debt at rates below 4%
• High-yield bonds with more than $91 billion outstanding are trading above upcoming call prices, making it attractive for issuers to redeem the securities in the next three months and signaling that the refinancing wave could continue
• The flood of deals put some pressure on spreads which widened 4bps to 476bps more than Treasuries. Yields rose 5bps to 5.27%

(Wall Street Journal)  Ford Selects ‘Car Guy’ as CEO To Revive Profit, Chart Future

• Ford Motor Co. plans to install Chief Operating Officer Jim Farley as its new CEO, putting the onus on the executive to produce the tangible results that eluded his predecessor Jim Hackett during his three-year run in the top job.
• The company said Tuesday that Mr. Farley, 58 years old, will succeed Mr. Hackett, 65, who is retiring on Oct. 1. Mr. Hackett will remain in an advisory role through next spring, the company said.
• Farley will be under pressure to quickly build on what he called a strong foundation left by his predecessor.
• In recent months, Ford has scrambled to borrow money as it burned through billions of dollars in cash. The company’s U.S. factories have recovered nearly to prepandemic levels, and the company signaled last week a third-quarter profit.
• Farley emerged in February as the leading contender to take over, when the former strategy chief and longtime marketing executive was elevated into the chief operating officer role. His promotion coincided with the sudden retirement of Ford’s president of automotive, Joe Hinrichs, who essentially had been serving as a co-No. 2 with Mr. Farley in what many viewed as a competition for the top job.
• Ford Executive Chairman Bill Ford Jr. said the CEO change has been planned for some time. He lauded Mr. Hackett for revamping Ford’s vehicle lineup, in part by shedding unprofitable sedans, and taking on a major revamp of Ford’s business outside the U.S. through a continuing, multibillion-dollar restructuring.
• He also described Mr. Farley as a “car guy” who understands the technological shifts disrupting the car business, from driverless cars to the influx of digital services into the cockpit.