The European crisis was back in the headlines yesterday, just when it seemed like they had been forgotten, causing the S&P 500 to have its biggest drop of 2013 to date, and risk appetite across asset classes to sour. High yield continues to trade with some weakness as investors seem unsure what the next direction for the market will be, and nobody wants to step up in front of a pullback as money flows continue to be mildly negative. The 10-year hovering around 2% also continues to give high yield investors pause, especially those in the higher quality/lower yielding area of the market. Three deals came yesterday in $2.3 billion of new high yield issuance. Caesars Entertainment priced a $1.5 billion tack-on to their existing 9% debt that was met with lukewarm demand and traded lower by ½ point on the break; the other two deals of the day performed well. Four deals are expected to price this afternoon for about $1.25 billion in proceeds. This morning equities are rebounding after yesterday’s losses, the HY19 Index is up ¼ of a point and high yield cash bonds are opening mixed as sell pressure from the passive ETFs persists on more outflows.
The HY 19 Index (Markit CDX North America High Yield Index) is composed of 100 non-investment grade entities, with all entities domiciled in North America. This index rolls every six months, in March and September.