Morning Commentary: High yield softens in Friday trading; energy names drop with crude price

By Paul A. Harris

Portland, Ore., April 1 – The high-yield bond market was a little softer on Friday morning, according to traders.

Junk bonds were flat to down ¼ point.

Energy names saw bigger price drops as crude oil prices weakened substantially on Friday morning.

The barrel price of West Texas Intermediate crude for May 2016 delivery was down $1.41, or 3.68%, at $36.93 heading into the New York mid-morning.

The Continental Resources, Inc. 5% senior notes due Sept. 15, 2022 were down 1 to 2 points at 84¾ bid, 85½ offered.

High-yield ETFs were slightly weaker. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 21 cents, or 0.26%, at $81.10 per share. SPDR Barclays High Yield Bond ETF (JNK), at $33.99 per share, was down 7 cents, or 0.21%.

Western Digital trades lower

All was quiet on the new issue front Friday morning, save for an announcement from MGM Growth Properties Operating Partnership LP that it plans to sell $1.05 billion of senior notes in connection with MGM Resorts International’s spinoff of gaming properties into a real estate investment trust.

Debt financing also includes a $2.75 billion senior secured credit facility via left lead BofA Merrill Lynch. The credit facility launched Friday.

The Western Digital Corp. megadeal that came earlier in the week saw a bit of price erosion, especially in the unsecured tranche, a trader said.

The split-rated 7 3/8% senior secured notes due April 1, 2023 (Ba1/BBB-/BBB-) were 101½ bid, 102 offered on Friday. Those bonds were seen at 102 1/8 bid, 102 3/8 offered on Thursday after having priced at par in an upsized $1,875,000,000 tranche (from $1.5 billion) on Wednesday.

The larger unsecured tranche, the straight speculative-grade 10½% senior unsecured notes due April 1, 2024 (Ba2/BB+/BB+), were either side of par in active trading on Friday morning, the trader said. They were par ¼ bid, par ¼ offered on Thursday.

The unsecured notes priced at par in a downsized $3.35 billion tranche (from $4.1 billion) on Wednesday.

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