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The September Effect In High Yield Bonds

Published Tue, 10 Sep 2019 10:07:19 -0400 on Seeking Alpha

In last week's holiday shortened trade, there were a number of new records set in the investment grade corporate bond market. It was the busiest week on record - both in terms of the number of new issues and the total dollars of issuance. Never had so many investment grade companies come to market for so much money in such a short time frame. There was good reason - financing costs are historically low with Deere (DE) and Disney (DIS) pricing the first 30-year debt with coupons below 3%.
While the investment grade corporate bond markets made the news, there was also an uptick in primary issuance in the high yield corporate bond market. Diversified holding company Icahn Enterprises (IEP), physical records storage REIT Iron Mountain (IRM), independent exploration and production company Murphy Oil USA (MUR), restaurateurs Yum! Brands (YUM) and Restaurant Brands International (QSR), Australian miner FMG Resources, hospital supply company Hill-Rom (HRC), all printed benchmark deals with coupons between 4.375% and 4.875%.
While the amount of issuance did not set records like the investment grade corporate bond market, the quick increase in supply was a marked departure from thin issuance and tightened liquidity amidst market turmoil in late August. With higher quality issuers successfully printing deals, expect lower quality issuers to opportunistically tap markets as well.
As shown below, September has historically been the weakest month for the high yield bond market. This... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ICAHN ENTERPRISES LP 67.60   16.1 4.20 8.00 11.95
IRON MOUNTAIN 34.14   28.4 1.20 2.44 7.29
SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF 108.94   0.0 0.00 6.07 5.58
MURPHY OIL 20.42   10.7 1.91 1.00 4.79
DEERE 163.26   15.9 10.29 3.04 1.85
YUM! BRANDS 113.27   27.0 4.19 1.68 1.46
WALT DISNEY 137.50   17.3 7.93 1.76 1.30
HILL-ROM 105.77   33.4 3.17 0.84 0.79