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Morning Commentary: Junk opens slightly lower after Tuesday-Wednesday rally; ETFs see inflows
By Paul A. Harris
Portland, Ore., Dec. 17 – The high-yield bond market opened slightly weaker on Thursday, sources said.
The CDX HY 25 index was down an eighth of a point, according to an investor.
“The market was well bid on Wednesday, and stuff was getting picked over,” the source said.
“Yesterday we were 100 basis point better than we were on Monday, so it's not surprising that stuff might be down a hair today.”
ETFs were lower heading into the New York mid-morning.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 45 cents at $80.28 per share, off 0.56%. The SPDR Barclays High Yield Bond ETF (JNK), at $33.90 per share, was down 19 cents, or 0.57%.
The Navistar International Corp. 8¼% senior notes due Nov. 1, 2021 were 2 points to 3 points better on Thursday at 59¾ bid, 60¾% offered, according to a trader, who added that there has not been much of the paper offered, so the offer side is possibly higher.
On Wednesday the Navistar 8¼% notes were 57 1/8 bid, 58½ offered, the source added.
The positive move came in spite of the fact that Navistar reported on Thursday that it lost $50 million during its fiscal fourth quarter.
Meanwhile the new issue market remained dormant on Thursday, as it has been all week.
The primary market is likely to be shuttered for the remainder of 2015, sources say.
Mixed flows
The cash flows of the dedicated high-yield funds were mixed on Wednesday, according to an investor.
High-yield ETFs saw sizable inflows of $732 million on the day.
However actively managed funds sustained $305 million of outflows on Wednesday.
The split did not surprise the investor, who remarked that actively managed funds don't move as quickly as ETFs.
Also, ETFs had been trading at a discount to net asset valuations (NAVs), the investor said.
Meanwhile the dedicated bank loan funds also saw outflows of $505 million on Wednesday, the source added.
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