Deals and flows analysis in the high-yield bond markets
High-yield bond issuance fell last week after Fed Chair Janet Yellen released a relatively dovish statement. She lowered the Fed’s forecast for more interest rate hikes through 2018 due to the economic slowdown, financial turmoil, and falling oil prices. The Fed kept the federal funds rate unchanged at 0.25%–0.50% after the two-day Federal Open Market Committee meeting. It concluded on March 16, 2016.
According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $2.5 billion—the fifth highest in 2016 so far—was issued in the week ending March 18. In the previous week, high-yield issuance stood at $4.1 billion. The number of transactions remained unchanged at six—compared to the previous week.
Last week brought the total US dollar-denominated issuance of high-yield debt to $24.3 billion in 2016 year-to-date. This is 71.0% lower than the same period in 2015.
High-yield debt is tracked by mutual funds like the Prudential Short Duration High Yield Income Fund – Class A (HYSAX) and the TIAA-CREF High-Yield Fund – Retail Class (TIYRX). It’s tracked by ETFs like the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).
Purpose of the deals
Six deals were priced last week. Three of the deals were for refinancing purposes. The other deals were for general corporate purposes.
MDC Partners (MDCA), Cinemark USA, and Avis Budget Car Rental—a wholly owned subsidiary of Avis Budget Group (CAR)—issued dollar-denominated junk bonds for refinancing purposes. CNH Industrial Capital—a wholly owned subsidiary of CNH Industrial N.V. (CNHI), Radian Group (RDN), and Clean Harbors (CLH) issued dollar-denominated junk bonds for general corporate purposes.
Next, we’ll analyze the deals priced last week. We’ll also look at the pricing trends in detail.