High Yield

Treasuries Extend Gains After 30 Year Auction Sees Solid Demand, Stops Through

Attention was glued to today's sale, and this week's final auction, a reopening of $12 billion in 29-year 10-month paper (Cusip RT7), which contrary to whisper expectations that the auction would disappoint, there was virtually no problem in placing the ultra long dated paper amid willing buyers.

Strong Demand For $24 Billion In 3 Year Paper In Today's First Treasury Auction

In the first of two Treasury auctions today, moments ago the US Treasury sold $24 billion in 3 Year paper at a high yield of 1.045%, stopping through the when issued by 0.5bps. The strong headline performance was somewhat unexpected in light of today's curve action, as well as the lack of any "specialness" in the 3Y repo market. Underscoring the strength of the auction, the bid to cover jumped from last month's 2.773 to 2.922, well above the 6 month trailing average of 2.815.

Deutsche Bank Sells Another $1.5 Billion In Debt At Junk Bond Terms

Taking advantage of an open debt issuance window, overnight Deutsche Bank issued another $1.5 billion in bonds, tapping a $3 billion bond issue that prices last Friday. The reason for the heightened investor interest is that DB agreed to pay a "near junk bond" yield of 4.191%, confirming that while DB sitll has market access it comes at a substantial cost.

Barclays Warns The Party Is Almost Over As Payouts Exceed Cash Flow By $115 Billion

Corporate buybacks plus dividends will surpass $1 trillion in 2016, for the first time ever, according to Barclays calculations. This means that payouts to shareholders will surpass total S&P500 cash flow by a whopping $115 billion. And with corporate balance sheets increasing encumbered, Barclays believes that the rate of payouts, rising at 20% in recent years, is about to grind to a halt, meaning that for stocks, the "party is almost over."

Goldman Tells Clients To Go To Cash As "Growth Shocks" Are Coming

"In the recent environment of low volatility, and with high valuations across assets, we are inclined to keep cash reserves to take advantage of more attractive entry points in case of shocks. Potential ‘growth shocks’ continue to loom until year-end as political risks remain elevated, given the upcoming US presidential elections and Italian referendum, and the UK government’s plan to trigger Article 50 by March 2017."

Treasury Sells 7Y Paper In Another Mediocre, Tailing Auction; Bond Market Yawns

When the results for the sale of $28bn in 7 paper printed, the result was a modest tail, with a high yield of 1.389% tailing the 1.385% When Issued. As a reminder, last month's 7Y auction had an even bigger tail but that was due to concerns of a potential rate hike by the Fed in September; this time there was no such concern.

Junk-Bond Traders Pile Into Bearish Bets Ahead Of Fed/BoJ

After one the biggest rallies in the last seven years off the Feb lows, high-yield bond investors are rushing into bearish (hedge) positions ahead of this week's Fed/BoJ spectacle. Put volume (protecting downside) in the last few days has soared to levels only seen around Brexit and last December's Fed rate-hike as Bloomberg notes, investors have already become skittish on signs that global central banks may turn off the spigot.