Two-day junk rally ends; oils lower; Valeant mixed, Navistar up; funds plunge $3.81 billion

By Paul Deckelman and Paul A. Harris

New York, Dec. 17 – The high yield market’s two-session rally – after its long recent slide – came to an abrupt end on Thursday, with junk names generally lower, some by multiple points.

Energy names such as Oasis Petroleum Inc. and Chesapeake Energy Corp. were seen leading the way downward, in line with a fall in crude oil prices that took them to their lowest levels in nearly seven years.

The big winner on Tuesday and again on Wednesday, Valeant Pharmaceuticals International, Inc. was seen mixed, with its most widely traded bond seen lower but other credits in its capital structure extending their gains.

Navistar International Corp.’s bonds were better after the truck, bus and diesel engine manufacturer posted fiscal fourth quarter and full-year results. It announced a cash position of over $1 billion at the quarter- and the year-end, aided by a term loan refinancing deal it did back in August.

The high yield primary remained quiet and, in the opinion of many participants, likely done for the year.

Statistical measures of junk market performance turned lower across the board on Thursday.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – was decidedly negative for a second straight week. Some $3.811 billion more left those funds than came into them in the week ended Wednesday – the biggest outflow seen so far this year and third-biggest of all time.

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