HY Market Weekly Minutes: Deals Surge as Strong Jobs Print Fails to Deter Rate Cut Hopes (December 6, 2024)
A Brief Recap of Last Week's High Yield Market Performance
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The high yield market hit fresh yearly highs last week, powering through a robust jobs report that might typically spark rate concerns. Spreads compressed another 3bps to 263bps while yields dropped 9bps to 7.05%, pushing YTD returns above +9%. The technical backdrop flexed its muscle as issuers rushed to market with $5.1 billion across nine deals—the busiest week since October.
More impressive than volume was execution. Iron Mountain’s upsized $1.2 billion offering not only priced at the tight end of guidance but traded up to 101, highlighting the market’s seemingly insatiable appetite for paper even at post-GFC tight spread levels. Meanwhile, Genesis Energy managed to upsize its deal by $200 million while still pricing at par.
The constructive tone persisted even as November payrolls jumped 227,000 and wages grew +0.4% month-over-month. Rather than sparking rate concerns, the market took the data in stride with rate cut expectations for December holding above 67%.
Let’s dive in.
Weekly Performance Recap
High yield notched another winning week with the index gaining +0.42%, capping Friday’s session with a +0.11% advance that pushed YTD returns to +9.11%. Performance was remarkably balanced across ratings buckets, with BBs, Bs and CCCs all delivering between +0.42% and +0.45% for the week.
The yield picture continues improving, with the index yield-to-worst (YTW) now sitting at 7.05%—just 9bps above September’s YTD low of 6.96%. BB yields have compressed to 5.96%, merely 17bps from their YTD tights at 5.79%.
Primary Market Activity
New issue activity surged this week with nine deals totaling $5.1 billion pricing across the market—marking a six-week high for weekly volume. The calendar showcased the market’s depth, with transactions spanning both refinancing and M&A-driven issuance.
Notable transactions included:
Iron Mountain placed $1.2 billion of BB-/Ba3 rated 2033 notes at 6.25%, upsized from $750 million amid strong demand
Ryan Specialty tacked on $600 million to its 2032 secured notes at 99.5 to yield 5.957%, increased from initial $500 million target
Crescent Energy added $400 million to its 2032 notes at 100.25 to yield 7.5%, upsized by $100 million
Veritiv launched a $350 million secured note add-on (downsized from $550 million) at 105.75
YTD issuance now stands at $274 billion, reflecting a robust 60% increase vs. the same period last year. December borrowing costs have moderated notably, with deals clearing at an average yield of 7.0% compared to 7.9% in November.
Secondary Market Dynamics
Looking Ahead
A packed calendar could test the market’s resilience this week. All eyes turn to Wednesday’s core CPI print, expected at +0.3% month-over-month, after November’s jobs report showed persistent wage pressures (+0.4%). Thursday’s jobless claims have become particularly crucial for credit investors after hitting their lowest level since April—any reversal could spark concerns about corporate health and default trajectories as we enter 2025.
The technical picture also remains remarkably strong despite spreads probing post-GFC tights at 263bps. Primary markets just delivered their busiest week since October with $5.1 billion of issuance, including several upsized deals and aggressive M&A financing. More telling has been the execution—December’s average new issue yield of 7.0% sits well inside November’s 7.9%, while secondary trading shows consistent demand with names like Iron Mountain trading up to 101 post-pricing.
Yet valuations suggest limited room for error. BB spreads at 156bps and CCCs at 531bps are pricing in near-perfect conditions just as net supply looks poised to increase. Bank lending standards may be easing for the first time in nine quarters, but the question becomes whether robust technicals and still-abundant liquidity can sustain these levels amid growing M&A activity. With the leveraged finance pipeline building and corporate animal spirits improving, December’s final weeks should reveal whether this remarkable rally has staying power into 2025.
Stay tuned.
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