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High-Yield Bond Funds Saw Third-Largest YTD Inflows, Yields Ticked Up

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Investor flows into high-yield bond funds

Investor flows into high-yield bond funds were positive for the sixth consecutive week. According to Lipper, net inflows into the high-yield bond funds totaled $2.2 billion in the week ended March 23, the third-largest year-to-date (or YTD) inflows.

In the week ended March 16, high-yield bond funds saw net inflows of $1.7 billion. With this inflow, the high-yield bond funds have witnessed YTD inflows of $8.2 billion.

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Yields and spreads analysis

Yields on high-yield debt and spreads between high-yield debt and Treasuries rose over the week ended March 24, 2016.

High-yield debt yields, as represented by the BofA Merrill Lynch U.S. High Yield Master II Effective Yield, rose by ten basis points from a week ago and ended at 8.39% on March 24, 2016.

Like yields, the Option-Adjusted Spread (or OAS) also rose in the week. The BofA Merrill Lynch U.S. High Yield Master II Option-Adjusted Spread rose by 11 basis points from last week to end at 6.93% on March 24.

Returns on high-yield debt indexes, mutual funds, and ETFs

Bond yields and prices move in opposite directions. With yields falling, returns on high-yield debt fell in the week ended March 24. The BofA Merrill Lynch U.S. High Yield Master II Index fell 0.1% over the week. The returns in 2016 were positive, with the index up by 3.2% year-to-date.

Mutual funds such as the American Funds American High-Income Trust –Class A (AHITX) and the PIMCO High Yield Fund – Class A (PHDAX) provide exposure to high-yield debt. Weekly returns of AHITX and thePHDAX were down by 0.3% and 0.5%, respectively.

Popular exchange-traded funds providing exposure to high-yield debt also fell 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) fell 1.1%, 0.5%, and 1.0%, respectively, over the week ended March 24.

In the primary market, Intelsat Jackson Holdings S.A.—a subsidiary of Intelsat S.A. (I)—AMC Networks (AMCX), CenturyLink (CTL), and Boyd Gaming (BYD) were some of the issuers of high-yield bonds. You can read more about the primary market activity in Part 3 of this series.

In the next article, we will analyze primary market activity in leveraged loans.

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