The CDX HY 22 index opened a point lower at 104.95, the lowest level since the series launched in March, and was still mired around 105 late in the day, according to Tradeweb.
The spread differential between high-yield and investment-grade also jumped to 323bp, the most since October 2013, according to Bank of America Merrill Lynch data, highlighting how high-yield assets have come off worse.
“High-yield is getting hit not only from widening spreads but also moves in the Treasury market right now,” said Rajeev Sharma, portfolio manager at First Investors Management Company.
The rocky conditions led to another deal getting postponed, this time by General Cable, which had been expected to price a US$250m five-year bullet senior note on Friday.
Meanwhile recent new issues dropped in secondary trade.
T-Mobile’s 6% 2023 bonds, which was trading at par on Friday, were spotted as low as 97.75 on Monday. California Resources’ 6% 2024 bonds dipped to 100.25 before recovering to 100.75.
Amid the weaker tone, just one mandate hit the screens today from Consolidated Energy Finance – a dual-tranche US$1.25bn trade that joins three other deals in the pipeline.
September’s issuance tally is US$39.08bn with only one more day left in the month, and bankers are already turning their attention to October.
But there are worries the asset class could see a return of big outflows that dogged the sector in the summer. For the week ended September 24, Lipper reported a net inflow of US$528m into high-yield funds.
“The brief August rebound has disintegrated in September and the high-yield market index’s yield is above 6% for the first time since last fall,” said Citi credit analysts Michael Anderson and Angel Jia.
“The primary market has played a role in this, particularly given light cash balances among investors.”
They predicted flows to follow performance.
“The latest retreat could result in significant outflows over the near term. The model we introduced two weeks ago estimates a US$2.5-3bn outflow in the coming week,” the analysts said.
Some bankers took the setback in stride, saying that there were not many issuers under pressure to access the market in the very near term.
Others said deal flow would likely have been capped anyway, with many market participants at Deutsche Bank’s annual leveraged finance conference in Scottsdale, Arizona.
“The deals that have to come are not that large,” said one banker.
