Investor flows in high yield bond mutual funds
Net inflows in high yield bond mutual funds were negative for the second time in eight weeks. According to Lipper, net outflows totaled $1.0 billion in the week ended March 20. Net outflows had come in at $1.96 billion in the week ended March 13. Inflows total $7.2 billion year-to-date in 2015.
Yields and spreads analysis
Yields on high yield (HYG) debt fell, while spreads between high yield debt (JNK) and Treasuries (TLT) (IEF) rose over the week ended March 20. High yield debt yields, as represented by the BofA Merrill Lynch US High Yield Master II Effective Yield, fell by four basis points to end the week at 6.27%.
The option-adjusted spread (or OAS) rose in the week. The BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread rose by 13 basis points in the week to come in at 4.81% on March 20.
Returns on high yield debt indices and ETFs
Bond yields and prices move in opposite directions. Due to the fall in yields, returns on high yield debt were positive in the week ended March 20. The BofA Merrill Lynch US High Yield Master II Index rose by 0.04% over the week. Returns in 2015 were also positive, with the index up by 2.1% until March 20.
Popular ETFs that provide exposure to high yield debt also rose over the week. The prices of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), the PowerShares Fundamental High Yield Corporate Bond ETF (PHB), and the SPDR Barclays Capital High Yield Bond ETF (JNK) rose by 0.3%, 0.2%, and 0.1%, respectively, over the week ended March 20.
Rite Aid Corporation (RAD), Sensata Technologies (ST), and Masco Corporation (MAS) were among the most prolific issuers of high yield bonds in the primary market last week. You can read more about the primary market activity in Part 3 of this series.