uploads/2016/03/US-High-Yield-Bond-Market-Issuance-2016-03-161.jpg

What Led to the Surge in High Yield Bond Issuance Last Week?

By

Updated

Deals and flows in the high yield bond markets

High yield bond issuance rose last week as the stock Market improved due to the rise in oil prices. In mid-February, yields started falling, and issuers flocked to the high yield bond market. Further, market participants were closely watching for clues about a possible interest rate hike in the Federal Open Market Committee (or FOMC) meeting, which ended on March 16, 2016.

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) and by ETFs like the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).

Article continues below advertisement

According to data from S&P Capital IQ/LCD, dollar-denominated high yield debt amounting to $4.1 billion, the highest in 2016 so far, was issued in the week ending March 11. In the previous week, high yield issuance stood at $3.7 billion. The number of transactions was up to six last week from three in the previous week. Last week brought the total US dollar-denominated issuance of high yield debt to $20.8 billion in 2016. This is 72.0% lower than the issuance in the corresponding period of 2015.

Majority of deals for refinancing purposes

Six deals were priced last week: five for refinancing purposes and one for LBO (leveraged buyout) purposes.

Masco Corporation (MAS), First Data Corporation (FDC), Extended Stay America, Level 3 Communications (LVLT), and Sinclair Broadcast Group issued dollar-denominated junk bonds for refinancing purposes. Meanwhile, LeasePlan Corporation issued dollar-denominated junk bonds for LBO purposes.

We’ll analyze deals priced last week and pricing trends in detail in the next article in this series.

Advertisement

More From Market Realist