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Bond Tourists Expose Soft Underbelly Of America’s High-Yield Market
Highlights of the Week:from Payden & Rygel High Yield: Despite retail flows stalling in the last three weeks, the market remains well bid. A combination of foreign capital flows and separately managed accounts are providing price support as the market grinds tighter. Coupling this tailwind with prudent credit selection will reward long-term investors. Corporates: A recent stringent crackdown by anti-trust regulators has halted several mergers and acquisitions from being completed in the last year. Despite this slowdown, companies seeking to merge have still been rolling merrily ahead with their intentions. In fact, October 2016 now ranks as the month with the most corporate merger agreements ever, nearly breaking $250 billion. Whether or not they will be completed is another story • Municipals: While municipal yields have drifted near 7-month highs, the market has showed resilience in the face of over $16 billion in new supply over the past two weeks. After the first week of fund outflows YTD last week, investors added $335 million to funds this week. Municipals remain very attractive on a relative basis with 30-year municipals yielding in excess of 100% of Treasuries. https://www.payden.com/weekly/wir102816.pdf
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High Yield: Despite retail flows stalling in the last three weeks, the market remains well bid. A combination of foreign capital flows and separately managed
accounts are providing price support as the market grinds tighter. Coupling this tailwind with prudent credit selection will reward long-term investors.
Corporates: A recent stringent crackdown by anti-trust regulators has halted several mergers and acquisitions from being completed in the last year.
Despite this slowdown, companies seeking to merge have still been rolling merrily ahead with their intentions. In fact, October 2016 now ranks as
the month with the most corporate merger agreements ever, nearly breaking $250 billion. Whether or not they will be completed is another story
• Municipals: While municipal yields have drifted near 7-month highs, the market has showed resilience in the face of over $16 billion in new supply
over the past two weeks. After the first week of fund outflows YTD last week, investors added $335 million to funds this week. Municipals remain
very attractive on a relative basis with 30-year municipals yielding in excess of 100% of Treasuries.
https://www.payden.com/weekly/wir102816.pdf