Morning Commentary: High-yield index goes negative year to date; new issues hang in; primary quiet

By Paul A. Harris

Portland, Ore., Aug. 21 – High-yield bonds were under pressure heading into the New York midday on Friday, according to a trader.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.11 at $85.66 per share.

The SPDR Barclays High Yield Bond ETF (JNK) was off 3 cents at $36.80 per share.

“There's not a lot going on,” the trader said.

“It looks like another summer Friday, with people heading for the exits early.

Index posts negative return

The Merrill Lynch US High Yield Master II index dropped into negative territory on Friday, posting a year-to-date return of negative 0.03 heading into midday, the trader said.

The index price dropped below 95, down from 95.50 on Wednesday.

However some recent issues continued to hold above issue prices.

Post Holdings, Inc.’s 7¾% notes due March 15, 2024 and the 8% notes due July 15, 2025 were both 101½ bid, 102¼ offered on Friday.

Both bonds were 102 1/8 bid, 102 3/8 offered on Wednesday.

The bonds came last week in a $1.2 billion overall transaction that saw both tranches price at par, at the wide ends of talk that had widened significantly from earlier guidance.

Party City Holdings Inc.’s 6 1/8% senior notes due Aug. 15, 2023 (B3/CCC+) were 101¼ bid, 101¾ offered on Friday.

The bonds, which don't trade much, have been hanging in anywhere between 101 and 101¾, the trader said.

The $350 million issue priced at par on Aug. 5.

Activity in Calfrac

Crude oil moved lower Friday morning.

The barrel price of West Texas Intermediate crude was $40.74, down 58 cents heading into midday.

Energy names remained under pressure.

The biggest movers among high-yield bonds were those of energy-related companies, the trader said.

The bonds of Calgary, Alta.-based provider of oilfield services Calfrac Holdings LP were 67¼ bid on Friday.

Those bonds don't trade a lot, but they have been active over the past two days, the trader said.

The bonds were in the low 80s and high 70s, earlier in the week, then dropped to the mid 70s on Wednesday and were in the high 60s on Thursday.

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