Morning Commentary: Junk ETFs see $188 million Thursday inflow; market expects calendar to build

By Paul A. Harris

Portland, Ore., Feb. 16 – High-yield bonds were flat to slightly higher on Friday morning against a backdrop of better stock and energy prices, traders said.

The daily cash flows of the high-yield ETFs turned around on Thursday.

The ETFs saw $188 million of inflows on the day, a trader said.

That news arrives on the heels of a Thursday afternoon report that the dedicated junk funds sustained a whopping $6.31 billion of outflows during the week to Wednesday's close, the second biggest weekly outflow in the history of the market.

The cash flows of the actively managed high-yield funds remained in the red on Thursday, at negative $115 million. However, the magnitude of outflows sustained by the actively managed funds moderated over the course of the week, the trader said.

High-yield energy names appear to be somewhat correlated with the price of crude oil, according to a trader focused on that space.

Recently the sector has been generally strong when the barrel price of West Texas Intermediate crude has been above the $60 mark, the source added.

West Texas Intermediate for March 2018 delivery was selling for $61.09 on Friday, down a quarter, or 0.41%, on the morning but up 3% on the week.

Recent energy deals were holding in above issue prices.

Jones Energy Holdings, LLC’s 9¼% senior secured first-lien notes due March 2023 (B2//B) were 98½ bid on Friday morning, sources said.

They were 98¾ bid, 99 offered on Thursday, a trader said.

The $450 million deal, which underwent extensive revisions amid the market turbulence of the past fortnight, priced at 97.526 to yield 9 7/8% last Monday, the most recent dollar-denominated issue to clear the market.

Noble Corp.'s 7 7/8% senior guaranteed notes due February 2026 (B2/B+) were 101 bid on Friday.

That deal came in a $750 million issue that priced at par on Jan. 17.

Meanwhile, heading into the long Presidents Day weekend, to be followed by school vacation week in New York and Boston, the primary market remained shuttered on Friday.

Nevertheless, look for a few deals from JPMorgan in the week ahead, if the tone of the market remains positive, trader said.

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