High Yield

UBS CIO Warns "The Status Quo Is Over... Get Used To It"

"The status quo in Europe is over. We will have to get used to this. Political risk has risen, and we will be dependent on central bank interventions, the calmness of markets, and measured political decision-making to keep the world's economic growth momentum and thus support risk assets."

Surprisingly Strong 7Y Auction With Near Record Indirects Sends 10Y Yield To Session Lows

Following two poor auctions, when both the 2Y and 5Y tailed and showed a sizable departure of the recently solid Indirect Bid, today's 7Year auction was the other way, and with the When Issued trading at 1.507% at 1pm, the high yield printed at 1.497%, stopping through by 1 basis point, with the greater than expected demand perhaps a function of the change in risk sentiment during the day as both polls showed a lead for Leave.

Ugly, Tailing 5 Year Auction Sees Lowest Bid To Cover Since 2009

If yesterday's 2 Year auction was at best mediocre, today's auction of $34 billion in 5 Year paper was downright woeful. The high yield of 1.218% tailed the When Issued by a whopping 1.3bps, suggesting far less interest than the market expected. This was confirmed by a look at the fundamentals, which showed a Bid to Cover of just 2.29, far below last month's 2.60 and below the 12month average of 2.45%. In fact, the Bid to Cover was the lowest since 2009.

Treasury Sells $26 Billion In Lacklustre 2 Year Auction At Lowest Yield Since September 2015

With none of the curve trading special in repo, we did not expect a short squeeze into today's 2 Year auction, but even so with a yield of 0.745% - printing right on top of the 0.745% When Issued - it was still the lowest yield for an auction of this maturity since September 2015 when the Fed's first rate hike fake out took place, and 18bps below the May auction when the auction closed at a high yield of 0.92%. This was to be expected following the Fed's latest dovish relent which pushed the short-end of the curve sharply lower.

The Problem With Corporate Debt

There are actually two problems with corporate debt. One is that there is too much of it... the other is that a lot of it appears to be going sour.

Global Stocks Rebound As Brexit Odds Decline Following Tragic Death Of UK Lawmaker

While it may very well not last and all of yesterday's gains could evaporate instantly if the Brexit vote is set to take place as scheduled, all 10 industry groups in the MSCI All-Country World Index advanced, with the index rising 0.7% trimming the week’s drop 1.6%. The Stoxx Europe 600 Index rose 1.4%. Futures on the S&P 500 were little changed, after equities Thursday snapped their longest losing streak since February. . Oil rose, paring its biggest weekly decline in more than two months. Bond yields around the globe fell.

Goldman Prepares To Turn Bearish On Oil Again; Boosts 2016 Bond Default Target By 25%

"After a quiet Jan/Feb, E&P bankruptcies picked up steam in late 1Q ahead of spring borrowing base redeterminations. By our math, about $30bn of par value debt has defaulted in the HY E&P space YTD, representing about a 17% default rate. On the back of our bottom up analysis we are now raising our full year default forecast to 21% from 17% previously."

Near Record Foreign Buyers Carry Blistering 30Y Auction At Lowest Yield Since January 2015

Just like yesterday all concerns about potential auction weakness promptly melted away when the resulted printed just after 1pm Eastern, when the High Yield was revealed at 2.475%, stopping through the When Issued by 0.7 bps (the May auction tailed by 0.8 bps), and the lowest 30Y auction yield since January 2015, which was just 0.5bps lower.

Mario Draghi Is Now Buying Junk Bonds

A few days after the ECB unexpectedly announced its CSPP, or corporate bond buying program which based on its definition was limited to investment grade, non-financial debt, we explained "Why The ECB Will Be Forced To Buy Junk Bonds", saying that "the EU corporate sector’s penchant for bond buybacks may ultimately force Draghi further down the ratings ladder lest the ECB should end up entangled tender offers or else end up without enough debt to monetize." This was confirmed on the very first day of the ECB's bond purchases.

Blistering 10-Year Auction Stops Through Thanks To Record Foreign Central Bank Demand

All fears of a weak 10Y auction were laid to rest moments ago when the Treasury announced the results of today's 10Y reopening: printing at a high yield of 1.702%, this was the lowest yield for a 10 Year auction since December 2012. Furthermore, the Bid to Cover, rebounded from last month's 2.68 and printed at 2.70, above the six month average of 2.65. But once again the biggest action was in the internals, where Indirects Took down a whopping 73.6%, higher than last month's 73.5% and the highest on record. Directs were left with 7.2%, the lowest since last August, while Dealers ended up with only 19.2% of the issue.

Treasuries Slump After Foreign Buyers Flee From Mediocre, Tailing 2 Year Auction

One look at today's repo market levels before today's 3 Year auction would have suggested that just because 3 Year paper was trading special in repo, that we would be primed for another short squeeze. However, that did not happen. Instead, and contrary to last month's stellar 3 Year auction, moments ago the US Treasury reported that today's auction printed at a high yield of 0.93%, tailing the When Issued 0.928% by 0.2 bps.

Toyota Issues Bond At A 0.001% Coupon, Japan's Lowest Ever

Overnight a Toyota Motor unit sold yen bonds with the lowest coupon ever for a Japanese company. Toyota Finance Corp issued 20 billion yen ($186 million) of notes at a yield of 0.001%, according to a filing with the nation’s Finance Ministry. That’s the lowest coupon ever for a regular bond by a domestic company that isn’t backed by the government

BofA Credit Analyst Loses It: "Central Banks Created A Fantasy Land"

"We fully recognize and appreciate that low global yields and the need to stay invested creates a positive technical that is difficult to fight against. But fight we do.... We find it incredible that 76% of the most important economic indicators from the
selloff are worse today but yields are about 200bp lower."