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Morning Commentary: Junk partially retraces Monday losses; recent issues cling to premiums
By Paul A. Harris
Portland, Ore., Aug. 25 – Cash bonds were up ¼ of a point to 3/8 of a point heading into the East Coast midday, according to a trader.
The CDX HY 24 index was up 3/8 of a point to ½ of a point at 103½ bid, 103 5/8 offered.
“We’ve recovered some of what we lost yesterday, and some stuff is up, but the market is still very dislocated,” a trader remarked.
High-yield ETFs, which were sellers on Monday, returned as modest buyers on Tuesday, according to a New York trader, who reported seeing a couple of sizable offer-wanted (OWIC) lists.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 71 cents at $85.47 heading into the midday.
The SPDR Barclays High Yield Bond ETF (JNK) was 29 cents better at $36.59.
Recent deals resilient
At least some of the early and mid-August new issues continue to maintain their premiums, sources said on Tuesday.
Post Holdings, Inc.’s 7¾% notes due March 15, 2024 and 8% senior notes due July 15, 2025 (both B3/B) were both 101¾ bid, 102½ offered on Tuesday.
Both tranches priced at par on Aug. 12.
Meanwhile, with the modest improvement in crude oil prices – the barrel price of West Texas Intermediate crude was up 88 cents at $39.12 heading into midday – the California Resources Corp. 6% notes due November 2024 were 71 bid. They were seen at 68 bid on Monday.
California Resources priced the 6% notes in a massive $5 billion deal that came in three bullet tranches on Sept. 11, 2014.
They are big, liquid tranches, easy to trade into and out of, a trader remarked on Tuesday.
They are an easy means of gaining direct exposure to oil, thus their price is highly correlated to the price of crude the source said, adding that a lot of hedge funds short the bonds.
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