Risk-on sentiment returns; CDX sees largest single-day gain in four years; energy outperforms

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 4 – While the primary market remained dormant on Friday, a risk-on sentiment returned to the secondary space, which saw sudden and dramatic gains during Friday’s session.

The CDX High Yield 30 index saw its largest single-day increase in four years with credit spreads tightening about 35 basis points, a market source said.

With a strong jobs report, a dovish tone from the Federal Reserve, and optimism around pending U.S.-China trade talks a dramatic reversal occurred Friday.

The dramatic swing was expected by some sources who said the market was bound to recover just as suddenly and drastically as it sold off.

The energy sector was a major benefactor of the improved tone with junk bonds from California Resources Corp., Whiting Petroleum Corp., EP Energy Corp., and Oasis Petroleum Inc. gaining 4 to 5 points.

The health care sector also saw a large upswing with Bausch Health Cos. Inc.’s and Teva Pharmaceutical Industries Ltd.’s junk bonds leading the charge.

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