Junk Bond Issuance Market Sees Heightened Activity

All of the three US equity indices that we review in this weekly series fell in the week to August 7, 2015. The S&P 500 Index is tracked by the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV). It fell 1.20%. The Dow Jones Industrial Average (DJIA) is tracked by the SPDR Dow Jones Industrial Average ETF (DIA). It fell 1.80% week-over-week. It fell further away from the psychologically important 18,000 level. Meanwhile, the NASDAQ fell 1.60% last week.

Equity markets fell throughout last week with market participants eyeing cues on a rate hike by the Federal Reserve. This was the primary reason why equities fell on the last trading day of the week when the non-farm payrolls report was released. The report showed that the US added 215,000 jobs in July while a household survey showed that the unemployment rate stood at 5.30% for the month. Although job additions were lower compared to a few estimates, the overall trend remained strong. This indicates that the US central bank may consider hiking rates the next time it meets in September 2015.

Several investors are worried that a rate hike could possibly spell the end of a multi-year bull run that US stocks have enjoyed. As a result, equity indices fell.

Companies like Viacom (VIA) and Walt Disney (DIS) disappointed investors with their 2Q15 earnings.

There were a few positives like Tenet Healthcare (THC), Priceline (PCLN), and First Solar (FSLR). Their 2Q15 results gave investors reason to cheer. This led their stock prices higher.

A fall in crude oil prices weighed on energy companies’ stocks like ExxonMobil (XOM) and Chevron (CVX) due to oversupply concerns.

Junk bond yields rose week-over-week. Due to the rise in yields, ETFs investing in junk bonds like the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) fell in the week ending August 7.

This series will cover the developments in the primary and secondary markets for high-yield debt and leveraged loans. We’ll start with developments in the high-yield primary market issuance.

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Browse this series on Market Realist:

• Part 2 - High-Yield Bond Issuers Return to the Primary Market
• Part 3 - First Data was the Highest Junk Bond Issuer: Week to August 7
• Part 4 - Outflows Continue from High-Yield Bond Funds