uploads///US High Yield Bond Market Issuance

Why High-Yield Bond Market Issuance Slowed Last Week


May. 5 2016, Published 8:14 a.m. ET

Deals and flows analysis in high-yield bond markets

High-yield bond issuance activity slowed down last week after recording the second-highest YTD (year-to-date) issuance volume in the previous week. According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $6.3 billion was issued in the week ending April 29. In the previous week, the high-yield issuance was $10.1 billion. The number of transactions rose to seven last week from six in the previous week.

Last week brought the total US dollar-denominated issuance of high-yield debt to $61.6 billion YTD in 2016. This is 47.0% lower—compared to the same period in 2015.

Mutual funds like the PIMCO High Yield Fund – Class A (PHDAX) and the Fidelity High Income Fund (SPHIX) invest in junk bonds. PHDAX’s holdings include Citigroup (C) and Lloyds Banking Group (LYG). SPHIX holds junk bonds of Tenet Healthcare (THC) and Tronox Worldwide—a subsidiary of Tronox (TROX).

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

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Purpose of the deals

Seven deals were priced last week—five for refinancing, one for acquisition, and one for dividend recapitalization.

United Rentals (URI), Kaiser Aluminum (KALU), PQ Corporation, BlueScope Steel, and Trilogy Communications issued junk bonds for refinancing purposes.

Ardagh Holdings is a subsidiary of Ardagh Group SA. It issued dollar-denominated junk bonds for acquisition purposes. McGraw-Hill Global Education Holdings issued junk bonds for dividend recapitalization purposes.

In the next part, we’ll analyze the deals priced last week as well as pricing trends.


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