The average bid of LCD’s flow-name high-yield bonds advanced 49 bps in today’s reading, to 99.92% of par, yielding 6.71%, from 99.43% of par, yielding 6.89%, on July 9. Gains were broad based within the sample, with 11 on higher ground against three unchanged and one decliner.
Today’s positive observation is the first gain after a two-week slump. It wipes out Thursday’s 16 bps decrease, for a net gain of 33 bps week over week, but with the recent losses, the average is negative 80 bps over the past two weeks and negative 72 bps in the trailing-four-week reading.
The rebound comes alongside modest equity market gains since Greece’s deal over the weekend. However, it’s been fairly tenuous in high-yield as participants continue to keep an eye on U.S. Treasury rates and commodity prices.
The average bid sits at positive 422 bps for the year to date.
Recall that prior to sample revisions at the start of the year, the average bid had plunged to a three-year low of 93.33 on Dec. 16. However, a snap-back rally followed, and the average bid closed the year at 96.4, for a total loss of 536 bps in 2014.
With today’s increase in the average bid price, the average yield to worst slipped 18 bps, to 6.71%, but the average option-adjusted spread to worst cinched inward by 29 bps, to T+506. The greater move in spread as compared to yield can be linked to the weakness in the Treasury market of late, as rising yield encourages spread-to-Treasury compression.
Today’s reading in the flow names is wider than with broad index yield, but fairly in line with spread. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed yesterday with a 6.4% yield to worst and an option-adjusted spread to worst of T+484.
For further reference, take note that a June 24, 2014 reading of 106.98 – close to the February 2014 market peak of 107.03 – had the flow-name bond average yield at 5.02%, an all-time low, but spreads weren’t quite there. Indeed, the average yield was 7.63% at the prior-cycle peak in 2007, and the average spread at the time was T+290.
Bonds vs. loans
The average bid of LCD’s flow-name loans increased 19 bps in today’s reading, to 99.82% of par, for a discounted loan yield of 4.13%. The gap between the bond yield and discounted loan yield to maturity stands at 258 bps. – Staff reports
- Bids rise: The average bid of the 15 flow names advanced 49 bps, to 99.92.
- Yields fall: The average yield to worst slipped 18 bps, to 6.71%.
- Spreads tighten: The average spread to U.S. Treasuries cinched inward by 29 bps, to T+506.
- Gainers: The largest of the 11 gainers, Dish Network 5.875% notes due 2022, added two full points, to 100.75.
- Decliners: The lone decliner, Intelsat 7.75% notes due 2021, shed 1.5 points, to 79.5.
- Unchanged: Three of the 15 constituents were unchanged.