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High-Yield Bond Funds Had Small Inflows, Yields and Spreads Fell

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Investor flows into high-yield bond funds

Investor flows into high-yield bond funds were positive last week. According to Lipper, net inflows from high-yield bond funds totaled $85 million in the week ending April 13. In the previous week, high-yield bond funds saw net inflows of $1.2 billion. With inflows last week, high-yield bond funds witnessed YTD (year-to-date) inflows of $9.0 billion.

Yields and spreads analysis

Yields on high-yield debt and spreads between high-yield debt and Treasuries fell sharply over the week ending April 15, 2016.

High-yield debt yields, as represented by the BofA Merrill Lynch U.S. High Yield Master II Effective Yield, fell 39 basis points from a week ago and ended at 7.9% on April 15, 2016—the lowest YTD.

Like yields, the Option-Adjusted Spread also fell in the week. The BofA Merrill Lynch U.S. High Yield Master II Option-Adjusted Spread fell by 41 basis points from last week. It ended at 6.6% on April 15.

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

Bond yields and prices move in opposite directions. With yields falling, returns on high-yield debt fell in the week ending April 15. The BofA Merrill Lynch U.S. High Yield Master II Index rose 1.6% over the week. The returns in 2016 were positive. The index rose 5.7% YTD.

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. AHITX and PHDAX’s weekly returns rose by 1.5% and 1.0%, respectively.

Popular ETFs providing exposure to high-yield debt rose over the week. The prices of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Barclays Capital High Yield Bond ETF (JNK) rose 1.2% each over the week ending April 15.

In the primary market, Gaming and Leisure Properties (GLPI), Micron Technology (MU), Virgin Media, and Pinnacle Entertainment (PNK) were some of the issuers of high-yield bonds. You can read more about primary market activity in Part 3 of this series.

In the next part, we’ll analyze primary market activity in leveraged loans.

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