Big inflows, strong technicals bolster US high-yield market

Fri Jan 11, 2013 11:52am EST
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By Joy Ferguson

NEW YORK, Jan 11 (IFR) - The US high-yield market saw huge demand this week as investors look to put large amounts of cash to work, with heavy inflows reinforcing the strong technical backdrop.

Lipper reported US$1.113bn in inflows to high-yield mutual funds and ETFs for the week ending Wednesday, with hundreds of millions of dollars pouring into the market on a given day.

The positive shift in the market following the fiscal cliff agreement at the start of the year, combined with the extended quiet period over the holidays, has allowed the technical backdrop to continue to improve.

That build-up of cash is combining with a relatively light new issue calendar, as M&A flow builds slowly and many opportunistic issuers have already come to market for their upcoming refinancing needs.

"The market remains very constructive," said a banker. "The calendar has been quieter than we have expected. There are a number of deals getting added as people ramp up post holiday, but most of the deals have been on the smaller side."

Indeed, demand is far outpacing supply as the new issue calendar builds slowly in the new year. This week, nearly US$8bn in US dollar deals have priced from 13 issuers.

Given such huge appetite, it was no surprise that all of the deals this week have so far done exceedingly well, with upsizes across the board and pricings on the tight or even through the tight end of talk.

Demand for Bombardier's deal was such that the company dramatically doubled its offering to US$2bn.   Continued...