Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were +$4.4 billion and year to date flows stand at $29.5 billion. New issuance for the week was $13.1 billion and year to date issuance is at $169.5 billion.
(Bloomberg) High Yield Market Highlights
- S. junk bonds may steady on Friday after spreads widened the most in seven weeks. But after a volatile few days, would-be borrowers may stay on the sidelines for now.
- Spreads widened 46bps to 620bps over Treasuries on Thursday. They’ve widened almost 100bps since last Friday
- Yields jumped 44bps to 6.84%, the biggest increase in almost 12 weeks, according to data compiled by Bloomberg
- The pressure may ease with stock futures bouncing back after a dramatic sell-off spurred by concerns over a second wave of coronavirus infections and a slower-than-expected economic recovery
- The primary market has remained open amid the turbulence, but the pace has slowed with just two deals sold Thursday.
- Junk bond retail funds continued to see more inflows
- Junk bonds posted a loss of 1.35% on Thursday, the biggest one-day loss in more than seven weeks. They’ve posted losses for three straight days, the first time that’s happened since the week of May 11
(Bloomberg) Wall Street’s New Bond-Ordering System to Launch by End of Year
- The joint venture between Wall Street’s biggest banks that’s looking to revolutionize the way new corporate bonds are marketed and sold plans to launch in the fourth quarter of 2020.
- DirectBooks LLC — backed by Bank of America Corp., Barclays Plc, BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. — will start by announcing new credit offerings on its platform, before enabling orders and allocations, according to Richard Kerschner, the company’s chief executive officer.
- The platform is preparing to go live at a time when demand for the new service has arguably never been greater. U.S. and European investment-grade corporate bond sales each smashed through the trillion-dollar and euro marks at the fastest pace ever this year, highlighting the need for a digitized process to buy and sell new deals, Kerschner said.
- Wall Street is looking to modernize the process of buying new corporate bonds that still relies on phone calls, instant messaging and emails to handle billions of dollars in orders.
(Bloomberg) Fed Sees Zero Rates Through 2022, Commits to Keep Buying Bonds
- The Federal Reserve pledged to maintain at least the current pace of asset purchases and projected interest rates will remain near zero through 2022, as Chairman Jerome Powell committed the central bank to using all its tools to help the economy recover from the coronavirus.
- “We’re not even thinking about thinking about raising rates,” he told a video press conference Wednesday. “We are strongly committed to using our tools to do whatever we can for as long as it takes.”
- The Federal Open Market Committee earlier said it would increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities “at least at the current pace” to sustain smooth market functioning.
- A related statement from the New York Fed specified that the pace of the increase would be about $80 billion a month for purchases of Treasuries and about $40 billion of mortgage-backed securities.
- “Acting on mortgage-backed securities and Treasuries underscores their belief that more support is needed,” said Diane Swonk, chief economist with Grant Thornton in Chicago. “The Fed does not see a victory in the employment bounce-back. The risk of deflation is still high and the economy needs more support to heal more fully.”
- The Fed’s quarterly projections — updated for the first time since December, after officials skipped their March release amid the burgeoning pandemic — showed all policy makers expect the funds rate to remain near zero through the end of 2021. All but two officials saw rates staying there through 2022.
- The economy faces “considerable risks” over the medium term, the Fed said in its statement, reiterating language from the last FOMC meeting in late April.