Last Week’s Leveraged Loans Issuance Creates Another 2015 High
The US leveraged loans market saw an allocation of $23.6 billion worth of senior loans in the week to May 15. This was 24.2% higher than the previous week.
Leveraged loan funds saw inflows in the week ended May 15. The quantum of inflows was $173 million compared to net inflows of $54 million in the previous week.
Outflows in high-yield bond funds slowed down in the week ended May 15, although they continued for the fourth successive week.
The number of high-yield bond issuances kept the primary market very busy in the week ended May 15. Investors had a strong appetite for junk bonds.
Junk bond, or high-yield debt, issuers continued on a strong spree of fund raising from the primary junk bond market in the week ended May 15.
Stock markets were operating on the bad-news-is-good-news philosophy last week. But with a rate hike looming, these weak indicators may force the Fed to delay the hike.
Flows into investment-grade (LQD) bond funds returned to positive territory in the week ended May 15.
US corporates continued to be the largest issuers of high-grade debt for the third successive week.
Investment-grade corporate issuance slowed down to $44.675 billion in the primary market in the week to May 15, 2015.
In 2014, corporate bond yields touched a high of 3.33%. So far in 2015, the highest yield the indicator has seen was 3.18% on January 2.
A rise in European bond yields led to a sell-off in US investment-grade bonds in both Treasuries as well as corporate bonds in the week ending May 15.
With interest rates likely to go up by the end of the year, TIPS with shorter maturities look more attractive.
Yields on TIPS remain close to 0%, making them unattractive for some. However, considering that inflation rates could go up and remain there, these securities look attractive.
If the recent economic improvement in Europe is sustainable, it could lead to a higher demand for American goods in Europe. This could also contribute to higher inflation in the US.
Market demand for the four-week Treasury bills rose from the previous week. The percentage of indirect bids nearly doubled to 31.4% from 16% week-over-week.
The US Department of the Treasury auctioned 13-week Treasury bills, or T-bills, worth $24 billion on May 11. Increased market demand for the bills was led by a rise in allocated indirect bids.
Due to higher market demand for 26-week Treasury bills, the share of primary dealer bids fell to ~41% of the auction, down from 57.2% in the previous week.
Yield on three-year Treasury notes is related to movements in the federal funds rate. As a result, these auctions attract a lot of attention from stock and bond market participants.
Market demand for the ten-year Treasury notes jumped in May as both direct and indirect bids rose. The percentage of indirect bids increased to 60.2%.
The overall demand for the 30-year Treasury bond auction remained weak, with the bid-to-cover ratio reading 2.2x, which is lower than the 2.76x average from the past six auctions.
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