Flow-name bond bids rise 64 bps amid equity market cheer

High-yield bond bids recovered over the latest week as equities rallied in the face of encouraging data regarding the relative severity of the omicron variant of COVID-19. Following a decline of 38 basis points over the previous week, the average bid for LCD's 15-bond sample of liquid high-yield issues increased 64 bps for the week to Dec. 23 to 103.45% of par, marking a high since a reading at 103.67 on Nov. 10. The interim low was 102.08 on Dec. 2.

The latest rise reflected gains for 14 of the 15 constituent bonds against one slim decline of 0.125 points.

The higher bid level led to a decline of 16 bps in the sample's yield to worst over the latest week, to 4.47%, a low since Nov. 10. The sample's option-adjusted spread tightened 22 bps for the week, to T+300.

For reference, the price for the S&P U.S. High Yield Corporate Bond index advanced to 103.59 as of the Dec. 22 close from 103.31 on Dec. 15. The index yield to worst declined 14 bps over that span to 4.35%, and the option-adjusted spread tightened 7 bps to T+316.

Bonds vs. loans

The average bid of LCD's flow-name loan composite increased 3 bps to 99.16% of par for a discounted loan yield of 3.27%. The gap between the bond yield and the discounted loan yield to maturity is 120 bps.

The data:

* Bids rise: The average bid of the 15 flow names increased 64 bps to 103.45% of par.

* Yields fall: The average yield to worst decreased 16 bps to 4.47%.

* Spreads tighten: The average spread to U.S. Treasurys decreased 22 bps to T+300.