Morning Commentary: Junk opens to ‘sneaky bid’; funds saw Monday outflows; primary quiet

By Paul A. Harris

Portland, Ore., Jan. 5 – Junk opened to a “sneaky bid” on Tuesday, according to a portfolio manager, who added that the overall market was flat to slightly higher.

Against a backdrop of see-sawing stock prices – they opened the session higher but were in negative territory heading into the mid-morning – high-yield ETFs were flat to slightly higher.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 14 cents, or 0.17%, heading into the mid-morning, at $80.24 per share. SPDR Barclays High Yield Bond ETF (JNK), at $33.75 per share, was up a penny, or 0.02%.

The Chesapeake Energy Corp. 8% second-lien notes due 2022, which came in a December distressed exchange, were up a little at 49½ bid, 50½ offered, sources said.

The improvement came against a backdrop of weaker gas prices.

Nymex natural gas contracts to be settled on Feb. 16 were off a nickel, or 2.36%, heading into mid-morning, at $2.28 per MMBtu.

Among late 2015 issues, the Clear Channel International BV (Clear Channel Outdoor Holdings, Inc.) 8¾% senior notes due Dec. 15, 2020 (B2/B/BB-) were 102½ bid. The $225 million deal priced at 99.012 on Dec. 11. They were quoted at 102¼ bid, 103¼ offered on Monday.

Equinix Inc.’s 5 7/8% senior notes due Jan. 15, 2026 (B1/BB) were also better on the day at 103¼ bid, 104 offered.

The $1.1 billion issue priced at par on Nov. 19.

The primary market, meanwhile, remained quiet on Tuesday.

However that could soon change, sources said.

Dealers are expecting $20 billion of bond and loan business to be announced in the coming two weeks, pending market conditions, the portfolio manager said.

Outflows on Monday

The cash flows of the dedicated high-yield bond funds were negative on Monday.

High-yield ETFs saw $26 million of outflows on the day.

Asset managers sustained $255 million of outflows on Monday, said the manager, but added that the situation on the ground feels better than that.

Bank loan funds, meanwhile, saw $240 million of outflows on Monday.

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