“It’s Been A Long Year”

So bemoaned one friend from a broadly syndicated loan desk on Monday. We get it. As we covered in our first column of the year last week, there’s been enough to-ing and fro-ing in liquid markets in the past half-month to already fill your 2019 diary.

Such is the nature of today’s market velocity propelled by scary media headlines. It’s also where we are in the credit cycle. When teens are partying in the basement, no one expects parents coming downstairs at 7:30 pm. But around 2 am, ears start perking up.

High yield fund flows reversed last week dramatically. With rate hikes on the backburner for a bit, fixed income jockeys began turning their horses back to the track. Same was true of loan funds, which saw outflows moderate to $327 million. Departing cash looks to be slowing to a trickle, perhaps even a modest uptick this week.

Round-the-clock activity is also fundamental to loans and bonds. They trade. When participants are pushed in a direction by one market trend or another, they trade a lot. We saw that in spades in December, and it seems to be the case this month as well.