Morning Commentary: High yield CDX tracks oil prices lower; outflows continue; primary silent

By Paul A. Harris

Portland, Ore., Dec. 16 – The CDX North American High Yield Index Series 23 began the Tuesday session off 40 basis points at 103.7 bid, 103.8 offered and was unchanged from that level in the mid-morning, according to an investor.

The 10-year Treasury yielded 2.06% at the mid-morning, the investor noted, adding that it began the year at 3.03%.

Oil dives deeper

Crude oil prices sank another 70 to 80 cents on Tuesday, with the West Texas Intermediate barrel price at $55.10 in the New York mid-morning, a junk bond trader said.

The California Resources Corp. 6% senior notes due Nov. 15, 2024 were down another ½ point to a point, at 81 bid, 82½ offered, according to the trader.

The wider bid-offer spread indicated that trading in the bond has slowed somewhat, the trader remarked, adding that trading in the name has been quite active.

“Some days it has had the most volume,” the source said.

The deal priced at par in a massive $5 billion amount of issuance that came in three bullet tranches (Ba1/BB) on Sept. 11 and was still trading around par when the precipitous slide in crude oil prices got underway, the trader said.

The market is watching it because the issue is somewhat recent, it's very liquid and a lot of people are involved.

And a lot of people are shorting it, the trader added.

Outflows continue

Cash flows of the dedicated high-yield funds continued to be negative on Monday, the most recent session for which fund flows information was available at press time, according to a buyside source.

High-yield ETFs saw $350 million of outflows on Monday. Actively managed funds saw $265 million of outflows. And dedicated bank loan funds saw $315 million of outflows.

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