The continued demand for higher yields can also be seen in the high yield and senior loan markets. The yield-to-worst of the S&P U.S. Issued High Yield Corporate Bond Index on the year is 42 basis points lower and currently at a 4.97%. Recent demand has been so popular that there is much discussion as to whether these markets are trading “rich” or overvalued. The total rates of return performance for both the S&P U.S. Issued High Yield Corporate Bond Index and the S&P/LSTA U.S. Leveraged Loan 100 Index on the month are in step at a 0.57% and 0.60% respectively. Year-to-date these indices do differ, 4.25% for high yield versus 1.75% for senior loans. Senior Loans have had small but steady increases to date while high yield’s strong February performance (1.92%) has carried the other months.
Activity in the new issue investment grade market has increased along with the lower interest rates. Multiple maturity deals issued in the primary market by names such as Pfizer, General Electric, Prudential Financial, Toyota Motor Credit, Volkswagen and more have added to investment grade issuance totals. A number of the fixed rate deals should find their way into the S&P U.S. Issued Investment Grade Corporate Bond Index. The index has returned 0.97% month-to-date and 5.08% on the year.
Source: S&P Dow Jones Indices, Data as of 5/16/2014, Leveraged Loan data as of 5/18/2014.