uploads///US High Yield Bond Market Issuance

Why High-Yield Bond Issuance Fell in October


Aug. 18 2020, Updated 10:39 a.m. ET

Deals and flows analysis in the high-yield bond markets

High volatility in financial markets ensured low activity in the primary market of high-yield bonds in October. High-yield debt is tracked by the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). According to data from S&P Capital IQ LCD, dollar-denominated high-yield debt amounting to $9.4 billion was issued in October 2015. The issuance volume in October was down 52.0% compared to September, which had seen issuance worth $19.6 billion. The number of transactions fell to 12 in October from 22 in September.

The total dollar-denominated issuance of high-yield debt stands at $235.3 billion in 2015 YTD (year-to-date). This is 16.0% lower compared to the corresponding period of 2014.

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Deals for corporate purposes dominate issuance

Since the last week of June 2015, refinancing deals have dried up due to a sharp run-up in yields, which has made refinancing deals costly. Of the 12 deals that were priced in September, five were for general corporate purposes, four were for acquisitions, and the remaining three were for refinancing. This trend prevailed in October, as well.

Although refinancing was the least popular reason for issuing high-yield bonds, refinancing deals were at their peak in terms of volume in October. E-commerce and payment solutions provider First Data Corporation (FDC) issued junk bonds worth $3.4 billion—the largest in October—to refinance older debt.

Among other deals, specialty apparel retailer L Brands (LB) issued junk bonds worth $1.0 billion for general corporate purposes. Two subsidiaries of aircraft leasing company AerCap Holdings (AER) also raised high-yield bonds worth $1.0 billion for general corporate purposes.

A subsidiary of Level 3 Communications (LVLT), Concordia Healthcare Corp. (CXRX), Lennar Corporation (LEN), and The Scotts Miracle-Gro Company (SMG) were other major issuers of high-yield bonds last month.

We’ll revisit some of these deals and pricing trends in detail in the next article.


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