Morning Commentary: Market firm, volume light ahead of holiday weekend; ETFs trying to buy

By Paul A. Harris

Portland, Ore., July 1 – The junk bond market was decidedly firm on light volume ahead of the Independence Day holiday weekend in the United States, scheduled to get underway following a recommended early 2 p.m. ET close on Friday, a trader in New York said.

The high-yield ETFs were in the market as buyers at mid-morning, the source added.

The ETFs were higher on the morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.43%, or 36 cents, at $84.66 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $35.62 per share, was up 0.32%, or 12 cents.

The primary market was dormant as expected, sources said.

There is a deal pipeline that is somewhat thin.

Given stability in the secondary market, and continued firmness in the price of crude oil, the new issue bourse is expected to restart in the post-Independence Day week, sources say.

The barrel price of West Texas Intermediate crude for August 2016 delivery remained well under the key $50 threshold at mid-morning but was up 30 cents, or 0.62%, on the day at $48.63.

Investors have cash to put to work. And despite the post-Brexit sell-off, large offers in the secondary market have been few and far between, sources say.

Hence investors are looking for a calendar, a portfolio manager commented.

In spite of bearing the brunt of Brexit-related volatility, a regeneration of the European high-yield primary market in the week ahead is not out of the question, a London-based syndicate banker said on Friday.

“The secondary market is basically back to where it was before the vote,” the banker commented, referring to the July 23 Brexit vote in which voters in the United Kingdom rendered a decision to leave the European Union.

“It feels as though there is still an awful lot of uncertainty out there,” the source remarked, adding that a regeneration of the primary market would be headline dependent.

Given continued stability there could be a drive-by deal in the European market next week or the week after, the London-based banker said.

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