Morning Commentary: Junk opens flat; retail sector under pressure amid Macy's store closure news

By Paul A. Harris

Portland, Ore., Jan. 5 – The high-yield bond market opened flat amid flat to lower equity prices on Thursday, according to a trader in New York.

High-yield ETFs were flat at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up a penny, or 0.01%, at $87.39 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.81 per share, was also up a penny, or 0.04%.

The retail sector was under pressure on Thursday morning, trailing Wednesday's news that Macy's, which put up terrible numbers for the most recent quarter and issued a profit warning for the year ahead, plans to close 68 more stores, the trader said.

In the wake of that news, bonds of Neiman Marcus Group Ltd. were down 4 to 5 points, the trader said, spotting the Mariposa Borrower, Inc./Mariposa Merger Sub LLC (Neiman Marcus) 8% senior notes due Oct. 15, 2021 at 68 bid, 69 offered at mid-morning.

It was better news in the energy sector, however.

The barrel price of West Texas Intermediate crude oil for February 2017 delivery was up 1.05%, or 56 cents, at $53.82, at mid-morning.

The Concho Resources Inc. 4 3/8% senior notes due Jan. 15, 2025 (Ba2/BB+) were par bid, the trader said.

Concho's 4 3/8% notes, which priced at par in a $600 million issue on Dec. 13, came conspicuously rich, sources say.

Upon entering the secondary market the bonds lagged the new issue price, trading as low as 98 5/8 bid in the market's last full week of pre-holiday liquidity.

They were 99 bid, 99½ offered on Tuesday, according to a market source.

Lennar offers five-year notes

The primary market's drive-through window, which opened for the first time in 2017 on Wednesday when U.S. Concrete, Inc. priced a $200 million add-on to its 6 3/8% senior notes due June 1, 2024, opened again on Thursday with a deal from Lennar Corp.

Dealers gave initial guidance for Lennar's proposed $350 million offering of five-year senior bullet notes in the low 4% area.

The deal, backing Lennar's merger with WCI Communities, Inc., is set to price Thursday.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc., Mizuho Securities, Goldman Sach & Co., RBC Capital Markets and Wells Fargo Securities LLC are joint bookrunners.

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