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Morning Commentary: Illiquid junk market eases on Thursday; investors look to pipeline
By Paul A. Harris
Portland, Ore., June 30 – Cash bonds opened slightly weaker on Thursday, sources said.
Liquidity in the market continued to be low, according to a New York-based trader, who added that the thinness of the market suggested that the Independence Day holiday weekend – which doesn’t officially get underway until Friday’s recommended early close – was already underway.
This color was confirmed by a portfolio manager preparing to head out of the office for the weekend.
High-yield ETF share prices were flat to slightly better at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up a penny, or 0.01%, at $84.14 per share. The SPDR Barclays High Yield Bond ETF (JNK) at $35.46 per share, was up 0.2%, or 7 cents.
The new Intelsat Jackson Holdings SA 9½% senior secured notes were 104½ bid, 106 offered, according to the portfolio manager.
The notes, which were announced in a Thursday press release, were priced at 98 in a private placement that came in conjunction with a tender offer addressing bonds maturing in 2020 and 2021 (see related story in this issue).
The Intelsat Jackson Holdings 8% senior secured first-lien notes due Feb. 15, 2024 were also active on Thursday, said the trader, who marked them at 98¼ bid, 98¾ offered.
The primary market remained quiet but is apt to reactivate because the accounts have cash, and in spite of the recent selloff the secondary market has been bereft of any sizable offers, the investor said.
As long as the market holds in and oil prices remain stable, there should be new issue activity, the investor added, but noted that the deal pipeline is not believed to be vast.
The cash flows of the dedicated high-yield bond funds were negative on Wednesday.
High-yield ETFs sustained $71 million of outflows on the day.
Asset managers saw $105 million of outflows on Wednesday.
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