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High yield bond prices ride market rally; largest gain in 3 years

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High yield bond prices ride market rally; largest gain in 3 years

The average bid of high-yield bond flow-name bonds rallied 307 bps in today’s reading, to 96.4, yielding 8.8%, from 93.33, yielding 10.21%, on Dec. 16, according to LCD. All 15 credits in the sample were positive, with many up multiple points.

The huge rally wipes out Tuesday’s plunge of 241 bps, for a gain of 66 bps on the week. This is one of the largest gains ever recorded in the twice-weekly observation, and, in fact, the largest since a gain of 420 bps on Aug. 16, 2011. Similarly, Tuesday’s drop was the largest since Oct. 6, 2011.

Volatility three years ago was linked to concerns about a double-dip recession in the U.S. and worries about the debt crisis in Europe. This time around, of course, it’s all about the bear market in oil, the effect of low prices on energy-sector credits, and a spillover to non-energy bonds. As well, there’s been a negative technical influence of outflows from the asset class.

With a snap-back rally, the average is in the black for the week, but dating back two weeks the average is down 157 bps and it is lower by 289 bps in a trailing-four-week observation. Moreover, the average is down 536 bps in the year to date. – Matt Fuller

Follow Matt on Twitter for high yield bond mart news and insight.