Morning Commentary: Junk notches higher on jobless data; Diversey bonds continue climb

By Paul A. Harris

Portland, Ore., March 9 – After opening ¼ point lower on Thursday, the high-yield bond market was ¼ point higher at mid-morning following a Labor Department report that jobless claims came in significantly higher than expected during the week to March 4, a data point that investors hope will moderate the hand of the Fed in its fight against inflation, sources said.

With the Dow Jones industrial average up 0.24% at mid-morning, the Shares iBoxx $ High Yield Corporate Bd (HYG) share price was 0.36% higher, up 27 cents at $74.11.

The DISH Network Corp. 11¾% senior secured notes due November 2027 (Ba3/B+), one of the new year's benchmark issues, was 99½ bid, par offered on Thursday morning, a trader said.

Those bonds were 99¼ bid, 99¾ offered on Wednesday, the source added.

The $1.5 billion deal, an add-on, priced at 102 on Jan. 17.

Bonds of Diversey Holdings Ltd. remained highly active on Thursday after trading up a whopping 14 points on Wednesday following news that Solenis plans to acquire Diversey in a transaction valued at around $4.6 billion, sources said.

The Diamond (BC) BV (Diversey Holdings) 4 5/8% senior notes due 2029 were 97½ bid, 98 offered, as investors position themselves for a possible 101 change-of-control put, or a possible make-whole call at par ¼, according to a trader.

Those bonds changed hands on Tuesday at 82.

The dollar-denominated primary market remained quiet on Thursday and may be poised to put up a goose egg for the week, sources said.

Distractions are plentiful, they add.

This week the J.P. Morgan Global High Yield & Leveraged Finance Conference took place in Miami, attracting the participation of as much as 80% of the market, a trader asserted.

Next week begins the 2023 NCAA Division I “March Madness” Men's Basketball Tournament, with participants roundabout the market filling out office pool tournament brackets, and updating them hopefully, as events unfold, sources say.

Altice, a prospective issuer name that hit the high-yield grapevine a week ago, is still expected to show up sooner than later in the primary market, looking to refinance Cablevision Holdings debt, a portfolio manager said on Thursday morning.

There continues to be a modicum of activity on the euro-denominated new issue bourse.

Malta-based Media and Games Invest SE upsized its offering of four-year senior secured floating-rate notes to a range of €200 million to €225 million, from its previous size of €200 million, and talked the notes at a spread of 725 basis points over three-month Euribor.

The deal, being led by Pareto, is expected to price on Friday.

Meantime the Azelis Group NV 5¾% senior notes due 2028 (BB+/BB+), which priced on Wednesday, were trading well on Thursday, a London-based debt capital markets banker said.

Sources spotted the new Azelis notes at par ½ in Thursday morning.

The Belgium-based specialty chemicals and food ingredients supplier’s €400 million issue came tight to talk, at par.

Fund flows

The dedicated high-yield bond funds sustained $749 million of net daily cash outflows on Wednesday, according to a market source.

High-yield ETFs saw a hefty $754 million of outflows on the day.

Actively managed high-yield funds were flat to slightly positive, posting $5 million of inflows on Wednesday, the source said.

As the market awaits a weekly report on the cash flows of the various asset classes, expected later Thursday from fund-tracker Refinitiv Lipper, the combined high-yield funds are tracking $800 million of net outflows for the week that concluded with Wednesday’s close, according to the market source.

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