High Yield Morning Update

What started off looking like an ugly week has been surprisingly positive on earnings that were not as bad as expected, and speculation that softer than expected economic data will push the Fed to implement another stimulus package. In high yield land, the search for yield continues to push yields and spreads tighter. Yesterday the yield on the Bank of America High Yield Index (BAML) continued to tick tighter closing at 7.14%, and breaching 7% in the near-term seems to be almost a forgone conclusion.  The spread on the BAML HY Index compressed 3bps to 633bps over Treasuries. For performance, the Index was better by 0.17% yesterday, bringing the year-to-date total to 8.20%. Most of the focus in the market continues to be on primary issues as yesterday’s deals were all blowouts, trading up 2-3 points on the break, and there is already $3 billion in new issue slated to price today. Away from the new issue market, trading is spotty and mostly tied to earnings or news.