uploads///US High Yield Bond Fund Flows

High Yield Bond Funds Witness Inflows in the Week to May 22

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Investor flows in high yield bond funds

Investor flows in high yield bond funds turned positive last week. According to Lipper, net inflows totaled $906 million in the week ended May 22, compared to net outflows of $89 million in the week ended May 15. On a year-to-date (or YTD) basis, high yield bond funds have witnessed inflows to the tune of $7.6 billion.

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Yields and spreads analysis

Yields on high yield debt (HYG) rose marginally, but spreads between high yield debt (JNK) and Treasuries (TLT) (IEF) tightened over the week ended May 22. High yield debt yields, as represented by the BofA Merrill Lynch U.S. High Yield Master II Effective Yield, ended marginally up by one basis point at 6.12% from a week ago. Yields had touched a high of 6.14% earlier in the week but came down from that level.

Unlike yields, the Option Adjusted Spread (or OAS) tightened in the week. The BofA Merrill Lynch U.S. High Yield Master II Option-Adjusted Spread fell by eight basis points at 4.47% on May 22.

Returns on high yield debt indices and ETFs

Bond yields and prices move in opposite directions. With yields rising marginally, returns on high yield debt fell marginally in the week ended May 22. The BofA Merrill Lynch U.S. High Yield Master II Index fell by 0.01% over the week. Returns in 2015 were positive, with the index up by 3.9% until May 22.

Popular ETFs providing exposure to high yield debt ended down over the week. 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) fell by 0.22%, 0.21%, and 0.18%, respectively.

Energy companies were among the biggest issuers of high yield bonds last week. Energy Transfer Equity (ETE) issued high yield bonds worth $1.0 billion last week, the largest of the period. Meanwhile, EP Energy Corporation (EPE) issued bonds worth $800 million. Among other issuers, Berry Plastics Group (BERY) issued high yield bonds worth $700 million, and Plantronics (PLT) issued bonds worth $500 million. You can read more about the primary market activity in part three of this series.

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