Outflows from High Yield Bond Funds Continued Last Week
High Yield Bond Issuance Rose Again in Week Ended August 14
Investor flows in high yield bond funds
Investor flows in high yield bond funds were negative last week for the third consecutive week, following three successive weeks of inflows. According to Lipper, net outflows from high yield bond funds totaled $1.2 billion in the week ended August 12, the same as in the previous week. Due to these sharp outflows, high yield bond funds have witnessed outflows totaling $2.5 billion on a year-to-date basis.
Yields and spreads analysis
Yields on high yield debt (HYG) and spreads between high yield debt (JNK) and Treasuries (TLT) (IEF) were both unchanged in the week ended August 14. High yield debt yields, as represented by the BofA Merrill Lynch U.S. High Yield Master II Effective Yield, ended last week at 7.17%, the same as on August 7. Intra-week yields had surged to 7.37%—the highest level since June 30, 2012—but came down subsequently.
Like yields, the OAS (option adjusted spread) was also unchanged last week. The BofA Merrill Lynch U.S. High Yield Master II Option-Adjusted Spread stood at 5.52% on August 14—the same as on August 7. Intra-week, this indicator’s spread had surged to 5.79%—the highest level since November 19, 2012.
Returns on high yield debt indices and ETFs
Bond yields and prices move in opposite directions. But even though yields remained unchanged week-over-week, they surged intra-week. This led to negative returns on high yield debt in the week ended August 14. The BofA Merrill Lynch U.S. High Yield Master II Index fell 0.6% over the week. Nevertheless, returns in 2015 have been positive, and the index was up by 0.4% as of August 14.
Popular ETFs providing exposure to high yield debt also fell during the week. Prices of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), the PowerShares Fundamental High Yield Corporate Bond ETF (PHB), and the SPDR Barclays High Yield Bond ETF (JNK) fell 0.4%, 0.3%, and 0.5%, respectively.
In primary market issuance, Post Holdings (POST), Owens-Brockway Glass Container, an indirect subsidiary of Owens-Illinois (OI), MSCI (MSCI), AMAG Pharmaceuticals (AMAG), and Service Corporation International (SCI) were among those companies issuing the largest volumes of high yield bonds last week. You can read more about primary market activity in Part 3 of this series.
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