Morning Commentary: Signals shifting to green in speculative debt markets; PG&E better

By Paul A. Harris

Portland, Ore., Jan. 9 – The pace of the junk bond market quickened on Wednesday, according to a trader in New York, who noted that the metrics which drove the market sharply lower at the turn of the year now appear to be improving.

In the wake of extreme volatility heading into the end of the old year, U.S. stock indexes have been improving as mid-January approaches, the source said, adding that the Dow Jones industrial average was up half a percent on Tuesday morning.

High-yield ETFs were flat to slightly better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 8 cents, or 0.1%, at $83.81 per share.

Crude oil – the dynamo of the high-yield energy sector, which represents 15% of the index – was trading above the $50 per barrel-mark Wednesday morning, the trader noted.

The barrel price of West Texas Intermediate crude for February 2019 delivery was up 97 cents, or 1.95%, at $50.75, at mid-morning.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the index, reflected this improvement, shooting up 2½ points to 81½ bid, 82 offered, a trader said.

The bonds of high profile fallen angel PG&E Corp. recovered some of the ground they gave up on Tuesday when S&P Global Ratings slashed the San Francisco energy giant's issuer ratings to B from BBB-.

The Pacific Gas & Electric Co. 3¼% senior notes due September 2021 were up 2½ points at 87 bid, at mid-morning. The 6¼% senior notes due March 2039 at 88½ bid, were also up 2½ points, the trader said.

Meanwhile the primary market continued to await its first trade of 2019, the trader said.

Tuesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Tuesday, according to a trader.

High-yield ETFs saw $669 million of inflows on the day.

Actively managed high-yield funds saw $235 million of inflows on Tuesday, the trader said.

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