CAM High Yield Weekly Insights
(Bloomberg) High Yield Market Highlights
- US junk bond rally momentum faded, halting a three-day winning streak, after inflation data made a September rate cut slightly less of a sure thing. US wholesale inflation rose the most in three years, suggesting that higher input costs, as reflected in the producer price index, could show up in corporate earnings later this year.
- The US high yield market broke the run of gains across ratings. Yields climbed five basis points from a more than three-year low to 6.95%, driving the biggest one-day loss in nearly two weeks. The rally stalled across risk assets as equities hit a wall and traders scaled bets on rate cuts at the next Federal Reserve meeting.
- BB yields rose four basis points to 5.88% on Thursday driving a modest loss of 0.09% ending the three-day gaining streak
- CCC yields rose eight basis points from the more than four-month low of 10.39% to close at 10.47%
- While the markets paused after driving yields down to a more than three-year low, the sentiment overall appeared resilient as traders overlooked higher-than-expected inflation prints, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday
- With spreads not far from multi-decade tights, credit selection is critical, Barclays wrote
- The primary market paused for a breather after a flurry of issuance in the first three sessions of the week, pricing $650m on Thursday
- The torrid pace of bond sales drove the week’s supply to over $9b taking the August tally to a little more than $25b, the busiest since August 2021
- US junk bond supply is expected to enter the summer lull phase as the week winds down
This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.