Issuance of lower rated bonds and leveraged loans across Europe and the US fell in October, according to analysis by investment bank Morgan Stanley, with most expericing the lowest levels since May, excluding two weeks in summer when issuance dried up entirely.
The bank noted that issuance of US high yield (HY) bonds reached US$4 billion in the week ending 31 October, with year-to-date (YTD) supply tracking at US$279 billion, and increase of 8% year-on-year (YoY). In the US, leveraged loans issuance reached US$7 billion last week, with YTD supply tracking at US$398 billion, down 10% YoY.
While inflows are up for both HY funds (+US$17 billion) and leveraged loans (+US$7 billion) tightened by 2bp over the week, with total return rising by 24bp. Loans experienced net outflows of $130mn. YTD flows are tracking at +$7bn.
Appetite from end investors is varied across the lower rated US assets, with HY funds taking inflows of US$460 million over the past week and are up US$17 billion YTD, while loans are up US$7 billion year to date but saw outflows of US$130 million over the previous week.
European high yield has seen spreads tighten as across other high yield markets, while investors still ploughed US$576 million into European HY funds over the past week, according to the bank, pushing year to date investment up to US$8 billion. Issuance was half that of the US at €2bn over the last week, but proportionately it is slightly higher YTD, with a net supply of €135 billion, up 11% on the previous year.
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