Morning Commentary: Covid-19 sensitive names lifted as markets stage Thursday rally

By Paul A. Harris

Portland, Ore., March 26 – Credits with exposure to the economic impacts of the Covid-19 pandemic improved Thursday morning as markets in the United States staged an early rally, sources said.

Trading tended to be concentrated in high grade, crossover and fallen angel paper, according to a New York-based trader working from home.

Triple-B bonds from British-American cruise operator Carnival Corp., set to mature in slightly less than seven months, got a bounce, the trader said.

The Carnival 3.95% senior notes due Oct. 15, 2020 were trading right around 90 bid, after trading in the mid 80s a couple of days ago, the source added.

Likewise, junk players and distressed debt accounts were lifting badly beaten-up high-grade bonds of pandemic-sensitive companies, including Marriott International Inc. and Expedia Inc., which were up a couple of points in the early Thursday rally.

Bonds further down the credit spectrum remain in price discovery mode, sources say.

With the Dow Jones industrial average up 4.45% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) continued to improve, advancing 3.2%, or $2.35, at $75.82 per share.

Federal Reserve Bank chairman Jerome Powell's suggestion that the Fed “was not going to run out of ammunition” in combatting the economic fallout of the coronavirus catastrophe, likely buoyed the markets, said the trader.

Also, investors no doubt welcomed the passage of the $2 trillion coronavirus relief stimulus package from the U.S. Congress, the CARES Act, the source added.

However, there was also a good deal of short covering at play in some of the moves seen Thursday morning, the trader said, noting that news headlines were anything but ebullient, as Covid-19 deaths in the United States were reported to have topped the 1,000 mark, and the U.S. Labor Department saw a record 3.28 million unemployment claims in the past week.

A slight distance away from the center of the coronavirus bullseye, the more liquid paper of Ford Motor Co., which became a fallen angel earlier in the week following actions by two credit ratings agencies, were up 1 point to 5 points on Thursday morning, according to a trader, who noted that there were more offers-wanted-in-competition (OWICs) than bids-wanted in competition (BWICs).

Much of the activity in the Ford paper involved distressed debt investors, including European accounts; however, there were very few prints, the source added.

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