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Why are high yield volumes strong despite fund outflows? (Part 1)

Last week recorded large outflows in the high yield bond space, but volumes remained in line with the previous strong weeks, which had strong inflows

New issue volume is an important gauge of the high yield (HYG) market’s health. When issuance is strong, the new volumes price tighter than existing bonds in the market and cause a repricing of existing bonds. When investors start pushing back, new issue volumes fall as new issue yields start pricing in line with existing bonds in the market. When this happens, issuers have less of an incentive to refinance—unless they’re facing a debt maturity wall.

US High Yield Bond Market Issuance 2013-08-06Enlarge Graph

Volumes resilient

Last week, 19 transactions recorded a total volume of $7.9 billion. This volume was in line with the strong issuance the previous week.

Year-to-date issuance is close to $200 billion, compared with approximately $177 billion through the same period last year.

July overall was a very strong month, with 53 tranches pricing over $21 billion in high yield bonds (JNK). The recovery was quite strong compared to the barely $13 billion that priced in June after the market hit a rough patch after Bernanke’s comments.

Learn about the aggression of recent issuance

Continue to Part 2

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