Morning Commentary: Junk opens weak; energy slide continues; funds see massive outflows

By Paul A. Harris

Portland, Ore., March 11 – With the stock indexes off 3% on Wednesday morning, and the growing magnitude of the coronavirus catastrophe continuing to be drummed out in headlines from around the globe, junk bond prices were weak, traders said.

The Cleveland-Cliffs Inc. 6¾% senior secured notes due March 2026 (Ba3/BB-) were down ¾ of a point on the day at 98¼ bid, a high-yield bond trader said.

The notes priced at 98.783 to yield 7% on March 2.

The Cleveland-based iron ore pellet producer is one of only three companies to price high-yield bonds thus far in March.

The primary market is shuttered. One announced deal, the Del Monte Foods Inc. $575 million offering of seven-year senior secured notes (Caa2/CCC+), has gone quiet, sources say.

Bonds in the battered energy sector, which has fallen 24.81% in the year to Tuesday’s close, were down a further 3 points to 5 points on Wednesday, with certain names down 3 points to 8 points, according to a trader active in the space.

The Targa Resources Partners LP/Targa Resources Partners Finance Corp. 5% senior notes due January 2028 traded at 80, down 6 points on the day.

Murphy Oil Corp.'s 6 7/8% senior notes due August 2024 traded Wednesday at 78.84, down 4½ points.

The barrel price of West Texas Intermediate crude for April 2020 delivery fell another 3.9%, or $1.34, to $33.02, as the United Arab Emirates were heard to take up with Saudi Arabia in an effort to drive oil output to record highs in April, in reaction to the Russian Federation's refusal to countenance production cuts as a possible remedy to historically weak oil prices.

Tuesday outflows

The dedicated high-yield bond funds sustained a massive $3.3 billion of daily outflows on Tuesday, according to a market source, who characterized the daily outflow as one of the biggest on record and very broad-based.

High-yield ETFs saw $1.1 billion of outflows on the day.

Actively managed high-yield funds sustained $2.2 billion of outflows on Tuesday, the source said.

With only Wednesday's pending fund flow totals remaining to go in the tally, the combined funds are tracking $4.8 billion of outflows for the week that will conclude with Wednesday’s close, according to the market source.

Meanwhile the dedicated bank loan funds sustained $928 million of daily outflows on Tuesday, also one of the largest daily outflows on record, the market source added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.