Morning Commentary: Junk inches higher; ETFs see second big outflow in three sessions

By Paul A. Harris

Portland, Ore., Aug. 22 – Junk bonds opened ¼ of a point better on Tuesday as the market continued to rebound from last week’s sell-off, according to a bond trader in New York.

Rocketing risk-free rates remain an inhibiting force on the market, the source said, noting that the 10-year Treasury yield was hanging in near decadal highs at 4.34%.

Against a backdrop of mixed equities at mid-morning, the Shares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.09%, or seven cents, at $74.14.

The new issue market’s Monday dormancy carried over into the early going on Tuesday, with no new deals announced and none expected to price ahead of the session’s close.

The active dollar-denominated forward calendar was empty at the open.

New issue activity is expected to be sparse ahead of the Labor Day holiday weekend, which gets underway following the Sept. 1 close.

Turning to market technicals, high-yield ETFs sustained $1.26 billion of daily cash outflows on Monday, the trader said, adding that it was the fourth-largest outflow from the ETFs so far this year, as well as their second $1 billion-plus outflow in the past three sessions.

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