CAM High Yield Market Note
Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $0.7 billion and year to date flows stand at $13.9 billion. New issuance for the week was $0.8 billion and year to date HY is at $134.1 billion, which is +24% over the same period last year.
(Bloomberg) High Yield Market Highlights
- U.S. high-yield bonds are set to open with support from climbing stock futures and optimism that central banks will keep interest rates in check. That may allow the market to end the week on a high note after yields widened in all but one of the past four days.
- The Bloomberg Barclays U.S. Corporate High Yield index returned -0.07% this week through Thursday.
- Retail funds had a fifth consecutive week of inflows
- Month- to-date volume stood at $4.6b and July has traditionally been a light month for issuance averaging about $14b in the last six years
- Yields rose and returns turned negative again across all ratings with Triple-Cs losing the most yesterday
- While the Bloomberg Barclays high yield index dropped 0.05% yesterday, the energy index posted gains of 0.08%
- Junk bond YTD returns stand at 10.149%, the highest across fixed income and the best returns since 2016
- The high yield energy index YTD returns were at 7.359%
- BBs are the strongest performers, with YTD returns at 10.72%, followed by single Bs at 10.29%
- CCCs YTD returns stand at 7.73%
- Loans returns are at 6.016% YTD
(Market Watch) Distress in junk bond prices hit 6-month high in June
- The U.S. junk-bond market may be flashing a new warning that the credit cycle is nearing its end.
- About $52.5 billion of corporate bonds issued by U.S. companies with “junk” credit ratings were trading in June at prices below 70 cents on the dollar, the highest amount in six months, according to a J.P. Morgan note.
- Bonds that trade below par, or face value, can signal concerns about the ability of a borrower, or area of industry, to service its debts. Riskier companies that don’t qualify for top investment-grade ratings are already categorized as high-yield, or junk credits.
- While distressed bonds in June were just 4.3% of the over $1.2 trillion U.S. junk-bond market, the last time the volume was higher was December.
- Back then, U.S. debt and equity markets were reeling from a sharp selloff, which was sparked by fears that the Federal Reserve would keep raising rates, even through the U.S. economy was showing signs of slowing.
- Almost half of the sub-$70 high-yield bonds in June were from the energy sector, while telecommunications added another 21% and health care contributed about 12%, according to J.P. Morgan data.
- There have been growing concerns about slowing manufacturing in the U.S. and around the potential for sweeping health care reforms if a Democratic candidate ends up seizing the White House from Donald Trump.
- (Globe Newswire) Teleflex Announces Publication of a Large Real-World Study
- Teleflex Incorporated announced the publication of positive results from a multi-center study reaffirming the safety and effectiveness of the minimally invasive UroLift® System for the treatment of benign prostatic hyperplasia (BPH) in real-world patient populations. This is the largest, most comprehensive study to examine a minimally invasive BPH procedure in a real-world setting. Results were published in the Journal of Endourology.
- The Real-World Retrospective study was designed to evaluate the safety and effectiveness of the UroLift System in a real-world setting and to determine whether clinical outcomes are consistent with those found in controlled studies. The multi-center, retrospective study examined the results of 1,413 consecutive patients who received the UroLift System treatment over two years across 14 sites in North America and Australia.
- “Not only are the real-world results from this large, multi-center study consistent with the L.I.F.T study, this study also provides data in populations of patients who were not studied in the L.I.F.T study but are seen in a real-world clinic setting,” said Gregg Eure, M.D., urologist at Urology of Virginia in Virginia Beach, Virginia, a lead investigator and co-author of the study. “These findings should give urologists and patients the confidence to adopt the UroLift System within the broader BPH population.”
- The randomized L.I.F.T. clinical trial demonstrated that treatment with the UroLift System provides patients rapid and durable symptom relief. The minimally invasive procedure, which works without cutting, heating, or removing prostate tissue, demonstrates an excellent safety profile. Unlike BPH thermal therapies such as the most recent steam treatment, the real-world results for the UroLift System treatment showed complication rates and a patient experience that were consistent with controlled clinical trials.
- (Reuters) U.S. House seeks documents from companies that run immigrant detention centers
- Lawmakers in the U.S. House of Representatives said they have sent letters seeking documents and information from three companies responsible for detaining illegal immigrants arrested by U.S. immigration agents.
- The House Oversight Committee and its House Subcommittee on Civil Rights and Civil Liberties sent letters to CoreCivic Inc, Geo Group Inc, and DC Capital Partners LLC seeking information about the facilities they operate under contract from the U.S. government.
- “The committee is investigating the Trump administration’s rapidly increasing use of for-profit contractors to detain tens of thousands of immigrants, including a troubling series of reports of health and safety,” Representatives Elijah Cummings and Jamie Raskin wrote in the letters.
- The two Democrats said the Trump administration had “dramatically escalated” spending on contracts with for-profit companies that operate detention centers.
- In a separate letter to ICE, the two lawmakers asked for copies of the contracts with the three companies and documents detailing how ICE ensures that contractor-operated detention centers comply with standards set by the Department of Homeland Security.
(Reuters) SunTrust to stop financing private U.S. prison operators
- SunTrust Bank will stop financing operators of private prisons and immigration holding facilities, it said on Monday, becoming the latest lender to distance itself from a sector associated with the Trump administration’s policies.
- Banks have been under pressure to cut ties with the private prison industry since U.S. President Donald Trump’s restrictions on immigration raised concerns about detention center conditions. The centers account for about two-thirds of the people held by U.S. Immigration and Customs Enforcement, S&P Global Ratings estimated last year.
- Earlier this year, Wells Fargo, JPMorgan Chase & Co and Bank of America made similar commitments to phase out relationships with private prison companies.
- Executives of big banks have been confronted by activists at annual shareholder meetings and grilled by lawmakers about their role in the industry. Private prison operators have argued that activists mischaracterize the nature of their facilities.
- “It’s unfortunate that misleading political activism has been allowed to impact a decade-long banking relationship,” said Geo Group spokesman Pablo Paez.
- (CNBC) President Trump gives executive order to transform kidney care
- The executive order lays out ambitious goals for shifting 80% of patients currently on kidney dialysis out of high-cost clinic settings to more convenient and cost-effective home care by the end of the next decade.
- Yet the details of the proposal for achieving that goal appear to be far less threatening to the major dialysis providers than initially feared by many investors.
- The executive order proposes a 3% increase in home care dialysis reimbursement in the first year of a voluntary Medicare demonstration program, starting in 2020, but that extra boost would phase out over the three-year course of the initiative.
- Combined, Davita and Fresenius control more than 80% of the kidney dialysis market with the largest share of their revenues and profits coming from their dialysis clinics.