Western Asset High Income Fund II (HIX) - NYSE
  • Tue, Jun. 28, 1:30 PM
    • The iShares High Yield Corporate Bond ETF (NYSEARCA:HYG) saw $291M of inflows during Friday's market panic, according to Bloomberg. That brought weekly inflows for the fund up to a whopping $1.5B - the most this year.
    • With a Fed hike being completely price out this year (and some now betting on a rate cut), much of that money is from yield-chasing investors, says a BlackRock fixed-income strategist.
    • The rush of money wasn't able to stem falling junk bond prices over the past couple of sessions. They've rebounded today (HYG is higher by 0.95%), but remain well below last Thursday's closing levels.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU
    | Tue, Jun. 28, 1:30 PM | 3 Comments
  • Tue, Jun. 21, 2:56 PM
    • Covenant quality tumbled to 4.56 in May from 3.8 the previous month, according to Moody's, which rates on a one-to-five scale, with five being the worst. It was the largest single-month change on record.
    • Marty Fridson calls the plunge "a discouraging setback," but notes it could be due to the large amount of higher-rated junk issued in May - those high-yield bonds with stronger ratings tend to have easier covenants than the really junky stuff.
    • More from Fridson: "The long-run trend of covenant quality since the 2011 inception of the Moody’s series has been dismayingly negative. That tendency has been abetted by the investment banks, which compete for underwriting mandates partly on the basis of devising new loopholes."
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH, WFHY
    | Tue, Jun. 21, 2:56 PM | 5 Comments
  • Wed, May 25, 1:27 PM
    | Wed, May 25, 1:27 PM | 13 Comments
  • Wed, May 18, 11:52 AM
    • The recovery rate for high-yield bonds has been a super-low 13.9% thus far this year, according to Marty Fridson, continuing a trend begun last year when the recovery rate fell to 34%.
    • Source: Barron's
    • It's curious given the low default rate - just 2.83% in 2015 vs. the long-term average of 3.33%. Usually low default rates mean high recovery rates.
    • Fridson: "This outcome has generated anxiety among high-yield portfolio managers. Has some structural change taken place, they wonder, such that investors should expect lower average recovery rates over the remainder of the present credit cycle than in the past?"
    • Answering his own question, Fridson says special conditions associated with the energy crash along with one large, non-energy defaulter are behind the low recovery rate. For now, there's no clear evidence that recoveries on a more general basis are lower than they should be.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH
    | Wed, May 18, 11:52 AM | 8 Comments
  • Tue, May 17, 12:04 PM
    • Beginning June 13, the fund giant's flagship Total Return Fund (MUTF:PTTRX) will be allowed to invest up to 20% of its assets in junk bonds, up from 10% currently.
    • At the moment, Total Return has just a 2.5% allocation to high-yield, so taking it up to 20% would be quite the move. The junk bond market, says CIO Mark Kiesel, "is as attractive as it's been in four or five years."
    • Though high-yield has had a monster rally since Feb. 11, it's still at sharply lower levels than one or two years ago, and Bloomberg's Nir Kaissar reminds that though Total Return is a bond fund, it's never shied from taking risks  - whether under Bill Gross, or under current management.
    • Returns of late have suffered - the fund has returned 2.7% annually since Gross left vs. the Barclays Aggregate Bond Index return of 3.7%. AUM has suffered as well - down more than two-thirds from an April 2013 peak of nearly $300B to just $87B today.
    • Kaissar: "A renaissance for the Total Return Fund has to start with better performance, and one way to juice returns is to pile on more risk."
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK
    | Tue, May 17, 12:04 PM | 8 Comments
  • Tue, May 10, 11:37 AM
    • Moody's now expects global speculative-grade defaults to hit 5% by the end of November - that's up from 4.6% forecast one month ago, and 3.8% prior to that.
    • Perhaps looking in the rearview mirror as it drives, the agency takes note of the oil price slump as continuing to put upward pressure on defaults. Being at least a tiny bit forward-looking, Moody's at least mentions tighter credit spreads of late as perhaps suggesting the default rate could taper.
    • Of 46 defaults recorded in the year's first four months, 18 were in oil and gas, and 9 in metals and mining.
    • In the U.S. the default rate for metals and mining companies is expected to rise to 11.5%; and for oil and gas to 10.3%.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH
    | Tue, May 10, 11:37 AM | 1 Comment
  • Fri, Apr. 22, 11:30 AM
    • After a tough start to the year, junk bonds are on a tear - now having returned 6% YTD, with the overall yield sliding to just 6.9% from 10% earlier in 2016.
    • The bigger action has been in the junkiest of the junk sectors, with paper rated CCC having returned a full 9% YTD, including that of low-grade energy companies having returned 10%.
    • The term "Goldilocks" has re-entered the lexicon, with bulls saying we've got an economy strong enough to prevent defaults, but not so strong as to warrant tighter monetary policy. The oil price crash? Yesterday's news, they say.
    • Marty Fridson says high-yield has returned to "extreme overvaluation" territory. Jeff Gundlach, however, calls junk bonds still somewhat cheap, though noting the high proportion of the lowest-quality paper being issued of late.
    • Bottom line, writes Robin Wigglesworth in the FT: The rally should continue if for no other reason than the world remains yield-starved.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ANGL, ARDC, VLT, CIF, AIF, MPV, MHY, PCF, DHG, IVH, HYLS, JSD, UJB, GGM, CJNK, QLTC
    • Now read: Pessimism Recedes (April 21)
    | Fri, Apr. 22, 11:30 AM | 5 Comments
  • Tue, Apr. 12, 12:48 PM
    | Tue, Apr. 12, 12:48 PM | 1 Comment
  • Mon, Apr. 11, 3:23 PM
    • "Simply put, clients were not being compensated for credit risk," says the team of Matthew Mish and Stephen Caprio.
    • A slowdown in U.S. growth could be the catalyst that pricks the bubble, they say as speculative credits find it even more expensive to borrow.
    • It could be happening now as high-yield issuance is lower by 53% this year, and the lowest-grade paper (CCC ratings) yields 15.2% even after the big rally of the past couple of months.
    • If they're correct, the two say spreads to Treasurys could more than double to 16.4%. "Investors were herded into lower-quality credit risk for a yield pick-up of a couple hundred basis points ... But the fundamental problem is that the default risk is exponential, not linear in these securities."
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ANGL, ARDC, VLT, CIF, AIF, MPV, MHY, PCF, DHG, IVH, HYLS, JSD, UJB, GGM, CJNK, QLTC
    | Mon, Apr. 11, 3:23 PM | 18 Comments
  • Mon, Apr. 4, 3:11 PM
    | Mon, Apr. 4, 3:11 PM | 2 Comments
  • Mon, Apr. 4, 11:01 AM
    • Moody's oil and gas Liquidity Stress Index (LSI) hit a record high of 31.6% in March, up from 27.2% in February. The overall LSI rose to 10.3% from 9%.
    • The LSI measures the percentage of issuers with Moody's lowest liquidity rating of SGL-4.
    • "The composite LSI’s rise is echoing the climb following the last major turn in the credit cycle that started in mid-2007 and ultimately led to an LSI peak of 20.8% in March 2009," says Moody's John Puchalla, and though this spike is mostly about energy, liquidity cracks are beginning to show outside of that sector.
    • The non-oil and gas LSI rose to 4.8% in March from 4.1% previously, It's the highest level since 2010, but well-below the long-term average of 6.5%.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU
    • Now read: Is High Yield Signaling An All Clear? (April 4)
    | Mon, Apr. 4, 11:01 AM
  • Thu, Mar. 24, 11:28 AM
    • According to S&P, the average corporate credit rating is BB-, or two notches below investment grade. A 15-year low means this gauge is weaker today than at the height of the financial crisis.
    • At work here - beside the raft of energy and commodity-related downgrades - are easy corporate lending conditions which allow those companies with weaker credit ratings to tap the borrowing market.
    • Unfortunately, says S&P, lower-graded issuers seeking to refinance in the coming months are going to find less welcoming conditions. "A recalibrated, smaller, and more conservative lending environment, where restricted capital market access will enable lenders to better dictate terms and conditions, could prompt liquidity challenges, accelerate downgrades, and ultimately lead to a spike in defaults."
    • ETFs: HYG, JNK, LQD, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, CORP, HHY, SJB, PHF, NHS, FHY, ACP, MCI
    | Thu, Mar. 24, 11:28 AM | 12 Comments
  • Wed, Mar. 23, 9:10 AM
    • There's typically very little relationship between the returns on non-energy junk bonds and the price of oil, but the correlation between the two has soared of late to an all-time high of nearly 0.65 (with 1.00 being an exact match), according to Deutsche Bank.
    • Non-energy junk bonds make up about 88% of the high-yield market, according to BAML, which says the tight linkage today means investors aren't paying enough attention to growing risks among junk issuers. Among them: As the price of oil rises, junk bond prices improve even as costs high-yield issuers like manufacturers and transportation companies.
    • ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, PHF, NHS, FHY, ACP, MCI, KIO, VLT, ARDC, ANGL, CIF, AIF, MHY, PCF, MPV, DHG, HYLS, IVH, JSD, UJB, GGM, CJNK, QLTC
    | Wed, Mar. 23, 9:10 AM | 6 Comments
  • Fri, Mar. 18, 9:29 AM
    • With another week of inflows ($2.01B last week), U.S. high-yield funds have now recorded five straight weeks of inflows since what may or may not be a major bottom on Feb. 11. Over just the last four weeks, funds have drawn in $11.52B, the largest-ever one-month gain for that asset class, according to BAML.
    • BAML's Michael Contoupolos, however, pulls out the yellow flag: "The fundamental backdrop has not changed and defaults are in fact increasing ... These inflows are an over-reaction to transitory tailwinds ... The recent rally has limited staying power."
    • ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, PHF, NHS, FHY, ACP, MCI, KIO, VLT, ARDC, ANGL, CIF, AIF, MHY, PCF, MPV, DHG, HYLS, IVH, JSD, UJB, GGM, CJNK, QLTC
    | Fri, Mar. 18, 9:29 AM | 13 Comments
  • Fri, Mar. 11, 8:35 AM
    • U.S. corporate investment-grade funds saw the most inflows in a year in the week ended March 9, while loans funds had their first inflows since mid-2015, Lipper said late yesterday.
    • IG funds saw inflows of $2.18B vs. outflows of $761M in the previous week. Most inflows since Feb. 2015.
    • Loans funds saw inflows of $55M vs outflows of $357M in the prior week. This marks the first week of inflows since July 2015.
    • Corporate high-yield funds saw inflows of $1.8B, vs. inflows of $4.97B last week. This was the fourth straight week of inflows.
    • U.S. government Treasury funds saw outflows of $326M vs. outflows of $2.08B in the previous week. The second straight week of outflows.
    • U.S. government mortgage funds had inflows of $547M vs. inflows of $425M a week ago.
    • Muni funds had inflows of $518M vs. inflows of $212M a week ago. 23rd straight week of inflows.
    • ETFs: HYG, JNK, LQD, HIX, HYLD, DHY, PHT, EAD, HYT, VCSH, JQC, VCLT, CIK, VCIT, DSU, CORP, HHY, SJB, CSJ, PHF, NHS, FHY, ACP, MCI, KIO, VLT, CIU, ARDC, ANGL, CSI, CIF, AIF, MHY, PCF
    | Fri, Mar. 11, 8:35 AM | 1 Comment
  • Fri, Mar. 4, 7:42 AM
    | Fri, Mar. 4, 7:42 AM | 9 Comments
Company Description
The objective is to maximize current income, with a secondary objective of capital appreciation to the extent consistent with maximization of current income. It invests primarily in U.S. high-yield debt securities (corporate and sovereign), rated at the ti
Sector: Financial
Industry: Closed-End Fund - Debt
Country: United States