Energy sector BBB spreads compressed nearly 20 basis points following Powell’s comments, but perhaps the most notable development was the reopening of the high-yield new issue market by natural gas pipeline operator Targa Resources (NYSE: TRGP). Targa priced the first high-yield bond issuance this year, the first since December 11, 2018. Prior to this deal, the high-yield new issue market had been effectively closed for a month due to extremely poor sentiment surrounding risk assets.

It’s significant that the volatile Energy sector was the home of the first company to break the drought. So strong was the demand for this speculative new issue that Targa was able to garner $1.5 billion in bond proceeds, twice the planned initial amount. The new bonds have performed well thus far, trading 2 points higher and nearly 40 basis points tighter in spread since issuance.

This article was written by the team at Sage Advisory, a participant in the ETF Strategist Channel.


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