Morning Commentary: Liquidity drains from 2014 junk market; bonds unchanged amid firmer equities

By Paul A. Harris

Portland, Ore., Dec. 22 – With two full sessions and one abbreviated session left to play out in the junk bond market before Christmas Eve, liquidity was extremely thin on Monday, according to a trader.

Cash bonds were unchanged against a backdrop of firm equity prices, the source noted.

The CDX North American High Yield Index Series 23 was 106 3/8 bid, 106½ offered in the New York mid-morning, slightly weaker versus Friday’s close, the trader said.

Crude drifts lower

The price of crude oil continued the epic fall that began in the summer and gained momentum in late fall.

The West Texas Intermediate barrel price fell another $1.25 to $55.95, according to the trader.

Junk bonds in the oil and gas sector continue to trade at distressed levels.

The closely watched California Resources Corp. 6% senior notes due Nov. 15, 2024 were unchanged at 87 bid in the New York mid-morning.

The $2.25 billion deal priced at par in a massive $5 billion amount of issuance that came in three bullet tranches (Ba1/BB) on Sept. 11 and traded as high as 104½ bid in the immediate aftermath.

However notes in the short-maturity tranche were higher on Monday, the trader remarked.

The California Resources 5% notes due Jan. 15, 2020 were 89 bid, 89¼ offered, up 1½ points versus Friday’s close.

That tranche, sized at $1 billion, also priced at par on Sept. 11.

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