Corporate America flooded the market with new issuance in the first half of 2020 as the C-suite looked to build cash buffers and otherwise stack the sandbags ahead of the COVID hurricane.
Thanks to the Fed’s backstop, the market was receptive. Investors have been more than willing to frontrun and/or invest alongside Jerome Powell, whose commitment to buy corporate bonds continues to draw the ire of critics.
I’m running short on adjectives when it comes to the weekly deluge of flows into corporate credit funds. Suffice to say inflows continue to be robust, especially considering the economic backdrop. The latest data from Lipper, out Thursday, shows investment grade funds took in more than $9 billion for the second straight week.
It was the ninth consecutive weekly inflow. Around 50% of March’s historic bloodletting has now been reversed.
It’s the same story in high yield. Junk funds took in another $5.1 billion in the week ended Wednesday, on top of nearly $6 billion last week.
That makes 11 weeks in a row for high yield.
As Bloomberg’s Gowri Gurumurthy notes, five high yield deals for $3.8 billion priced on Wednesday “even as volatility increased”. Month-to-date issuance pushed above $20 billion.
Combined, high yield and investment grade funds have taken in some $92 billion since the week of April 15 on Lipper’s data.
It’ll be interesting to see if appetite for junk remains voracious in the event Thursday’s rather acute risk-off move turns out to be more than a red blip on an otherwise green radar screen.
The story of the year for credit is the same as it is for equities – an acute bout of turmoil, a Fed intervention, and a “V-shaped” bounce.
That, even as it’s still far from clear what “letter” will best define the shape of the economic recovery.