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US High Yield Bond Market Stumbles Through Uninspiring May

Outflow streak hits 30 weeks as leveraged loan funds see $686M withdrawal

Despite aging credit cycle, near-term spike in leveraged loan defaults unlikely

European leveraged loan returns stall in May, though best high yield, equities

Investors withdraw $1.5B from US leveraged loan funds as outflow streak hits 29 weeks


US High Yield Bond Market Stumbles Through Uninspiring May

US high yield issuance

In what is typically an active period for the U.S. high-yield market, just $15.3 billion of deals were issued in May, making it the lightest volume for that month since the paltry $9.5 billion in recession-era May 2010, according to LCD. Muted issuance came amid the noisy breach of the 3% threshold by the 10-year Treasury, political issues in Italy, simmering geopolitical concerns, and a relatively early Memorial Day.

May’s supply was spread across 33 tranches, up slightly from the 29 tranches finalized in April, though April’s volume was higher, at $16.7 billion.

After gaining in April, following two consecutive monthly declines, the average yield for new issues again fell, dropping 22 bps, to 7.12% in May. This figure, though, is 27 bps higher than the year-to-date average for new issue yields, according to LCD.

YTD, U.S. high yield issuance totals $96.55 billion, down 21% from the $123 billion at this point last year, according to LCD. In contrast, the floating-rate leveraged loan market has seen $237 billion of institutional issuance. That’s down 10% from 2017 (which was a record year for loan issuance, at $503 billion). – Jakema Lewis

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