By Katy Burne
Investors poured $680 million into funds dedicated to low-rated
corporate debt in the week ended on Wednesday, according to fund
tracker Lipper, snapping four weeks of declines that included the
previous week's record $7.1 billion weekly outflow.
Observers pointed to a change in sentiment in early August for
so-called junk bonds, as institutional buyers stepped in hunting
for bargains. U.S. high-yield bonds lost 1.33% in July, but in
August have returned 0.7% through Wednesday, according to Barclays
PLC.
Gulfport Energy this week increased a $250 million junk-bond
offering to $300 million, giving it more cash to pay down its
revolving credit line with banks and for other general corporate
purposes. The debt was priced to yield 6.106%, vs. the earlier
suggested rate of 6.165% to 6.234%, according to S&P Capital IQ
Leveraged Commentary & Data.
A debut bond offering for XPO Logistics priced at par, or 100
cents on the dollar, to yield 7.875%, at the issuer-friendly end of
the original suggested 7.875% to 8.125% range. Debut borrowers are
a hallmark of healthy junk-bond markets, where low-profile issuers
can take advantage of heavy demand. Immediately after the sale
closed, the bonds were quoted at 102 cents on the dollar, said
LCD.
The recent downdraft in junk debt highlights concerns that
purchasers in the $1.6 trillion U.S. market, lured by higher income
than on government and highly rated corporate bonds, have paid too
much for the securities. Prices had rallied over the past year,
sending yields to levels too low to compensate buyers for the risk
of the investments, some investors say.
The tremors are being closely scrutinized across Wall Street.
Many investors this year have expressed concerns that a pullback in
junk-bond prices could signal that market participants are
rethinking their willingness to take risk, foreshadowing further
declines in stocks and other risky assets.
The latest inflows could help to ease those concerns, some
traders and analysts said.
Write to Katy Burne at katy.burne@wsj.com
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