Morning Commentary: Junk sees strong Monday bid; Intelsat bonds beaten up following earnings

By Paul A. Harris

Portland, Ore., Feb. 22 – Junk bonds were better bid in both Europe and the United States on Monday, sources said.

Cash bonds on both sides of the Atlantic were up ¼ to ½ heading into the New York mid-morning, according to sources.

High-yield ETFs were posting strong gains. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 47 cents, or 0.6%, at $78.11 per share. SPDR Barclays High Yield Bond ETF (JNK), at $32.60 per share, was up 22 cents, or 0.66%.

The rally in junk was taking place against a backdrop of sharply higher crude oil prices, according to a trader, who noted that crude was up 7.25% on the day.

Intelsat hammered

The bonds of Intelsat SA fell sharply after the company posted preliminary results for the fourth quarter of 2015, a trader said.

Intelsat Jackson Holdings SA’s 5½% senior notes due Aug. 1, 2023 were 68½ bid, 69½ offered, down 6 points.

The company reported that total on-network revenue declined by $43.7 million, or 8%, to $518.3 million in the last three months of 2015, compared to the three months that ended Dec. 31, 2014.

All eyes on Solera

The Monday session produced no fresh primary market news, as the market winds its way through the final days of earnings blackouts in Europe and the United States, sources said.

One deal is in the market.

Solera, LLC is marketing $2.03 billion equivalent of eight-year senior notes (Caa1/B-) in tranches of euro-denominated and dollar-denominated notes on a roadshow set to wrap up Monday.

Price talk is expected on Tuesday, according to a U.S.-based trader.

The proposed dollar-denominated notes appear to be shaping up in a 9½% to 10% yield range, market sources say.

Preliminary guidance has yet to surface on the euro tranche, which came as no surprise to a sellside source in London.

“The roadshow took place at the height of the volatility,” said the sellsider, adding that formal talk on the euro tranche might come later Monday.

The euro-denominated calendar should pick up next week, when the earnings blackout is through, the sellsider said.

Meanwhile it could be a quiet week in the new issue market, sources say.

Look for a couple of dollar-denominated deals to surface before Friday, including one expected to be helmed by BofA Merrill Lynch, a trader said.

Mixed flows

The cash flows of the high-yield mutual funds were mixed on Friday, a trader said.

High-yield ETFs sustained $98 million of outflows on the day.

However actively managed funds saw $65 million of inflows on Friday.

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