Lipper reported a $3.28 billion in net outflows in high yield; quite close to the recent record of $3.4 billion withdrawn in June 2011 (YTD that number is $6.3 billion in outflows).
At a few notches below 500 bps in spread, it will be interesting how high yield continues to fare in the coming weeks. The sector has lost close to 3% from the peak in early May but observers still claim the asset class is rich. Interestingly, the asset class has lost gas not because of equity sell-offs necessarily but because of rate fears. Which brings us to another aspect in this reflation of credit: buyers who have flocked to high yield in the frothy stages have not been the regular high yield frolickers but folks who have been forced into the class to eke out a spread; a spread non-existent or thinned out in investment grade. Will this sell-off shake out the flighty crowd and re-establish the core crowd’s priorities? New issue calendars will tell.
And very interesting this week will the FOMC minutes and report, as the market wonders about the QE tapering and timing.
Have a good week ahead!
Investment grade +82 bps over swaps
High yield – $103 price, 6.25% yield to worst.
Emerging market +114 bps over swaps