Commercial Metals recovers in junkbondland; Range Resources strong; MI Windows outpaces

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 14 – With volatility driven by apprehensions about rising rates rocking the markets, the high-yield primary remained quiet on Friday.

Meanwhile, the secondary space closed the week on soft footing. However, it was holding up well considering the volatility in equity and Treasury markets.

“All things considered, the market’s okay,” a source said.

Despite the outflows over the past week, which topped $2 billion through Wednesday’s close, investors were still ready and willing to put money to work in junkbondland and holders remained reluctant to sell, the source said.

The onslaught of new paper on Thursday was performing well despite the weakness in the general market.

Commercial Metals Co.’s 4 3/8% senior notes due 2032 (Ba2/BB+/BB+) were under water in intraday activity but rallied to close the day flat.

Range Resources Corp.’s 4¾% senior notes due 2030 (B1/BB-) had a strong bid to them and closed the day at a premium to their issue price.

However, MI Windows and Doors, LLC’s 5½% senior notes due 2030 (B3/B/BB-) outperformed with the notes remaining on a 101-handle.

Primary week ahead

The market should remain active in the week ahead because high-yield accounts continue to have cash to put to work, a trader said.

Due to that technical dynamic some issuers are driving harder bargains than might be expected in a period of volatility in stocks, and with the market now taking a Fed Funds rate hike – sooner than later – to be an accomplished fact, a trader said on Friday.

Even though high-yield veterans are way beyond hoping that a new deal from Charter Communications, Inc. might come a little cheap, the order book for the new CCO Holdings LLC/CCO Holdings Capital Corp. 4¾% senior notes due February 2032 (B1/BB+/BB+) was nevertheless sufficiently filled for the company to upsize this week's deal to $1.2 billion issue from $1 billion and price it around ¼ point below early guidance.

Noting that the new CCO 4¾% notes were wrapped around par on Friday morning, the trader remarked that the deal was priced to perfection.

Secondary holds

While the secondary space closed the week on soft footing, the market was holding up relatively well given the volatility in broader markets amid economic data that continued to point to skyrocketing inflation and increased rate increases.

“There’s not a whole lot of good news out there,” a source said.

The big bank earnings that were released prior to the market open fell short of expectations and JPMorgan chief executive officer Jamie Dimon’s speculation about six to seven rate increases in the coming year rattled markets, which have not priced in the scenario.

The 10-year Treasury yield again climbed towards 1.8%, going as high as 1.795% before closing the day at 1.792%.

In spite of the headwinds, “All in all, things are holding in,” the source said.

While market players anticipate a healthy pullback, there remains the expectation that the market will rebound.

The secondary space is prone to strong recoveries after intense sell-offs and there remains concern about selling a security low and not being to repurchase unless at a much higher price later, the source said.

Commercial Metals rallies

Commercial Metals’ 4 3/8% senior notes due 2032 were under water during intraday activity but rallied to close the day flat.

The 4 3/8% notes were par bid heading into the market close, a source said.

There was about $50 million in reported volume.

The steel and metal manufacturer priced a $300 million tranche of the 4 3/8% notes at par on Thursday.

Pricing came in the middle of yield talk in the 4 3/8% area.

The deal was heavily oversubscribed with the company adding a $300 million tranche of 4 1/8% notes due 2030 after the deal launch.

The 4 1/8% notes priced at par in the middle of yield talk in the 4 1/8% area.

The deal was heard to be playing to $3 billion in demand.

Charter flat

Charter subsidiary CCO Holdings’ latest benchmark offering was holding at its issue price, despite weak market conditions.

The 4¾% notes due 2032 were changing hands in the par to par ¼ context heading into the close, sources said.

There was $100 million in reported volume.

CCO Holdings priced an upsized $1.2 billion, from $1 billion, issue of the 4¾% notes at par on Thursday.

Pricing came at the tight end of the 4¾% to 4 7/8% yield talk, which tightened from initial guidance in the 5% area.

The deal also played to heavy demand during bookbuilding and played to $3 billion in orders.

Range Resources well bid

Range Resources’ 4¾% senior notes due 2030 were well bid in the secondary.

While the notes remained in the par to par 1/8 context for the majority of Friday’s session, they were lifted into the close and stood poised to end the day at par 5/8, sources said.

The notes had a decent short to them, which held them back during the session, a source said.

However, there was strong demand with plenty of buyers in the market.

The notes saw about $101 million in reported volume.

Range Resources priced a $500 million issue of the 4¾% notes at par on Thursday.

Pricing came at the tight end of the 4¾% to 4 7/8% yield talk, which tightened from initial guidance in the low-5% area.

MI Windows outperforms

MI Window’s 5½% senior notes due 2030 outperformed in the secondary space with the notes maintaining a 101-handle, despite the weakness in the market.

While the notes dipped lower in intraday activity, they were marked at 101 bid, 101¼ offered heading into the close, a source said.

There was about $101 million in reported volume.

MI Windows and Doors priced an upsized $500 million, from $400 million, issue of the 5½% notes at par on Thursday.

Pricing came tighter than the 5¾% to 6% yield talk.

The offering was heavily oversubscribed and played to $4 billion in orders.

Fund flows

The cash flows of the dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time according to a market source.

Actively managed high-yield funds saw $375 million of inflows on the day.

However high-yield ETFs sustained $251 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds saw $2.24 billion of net outflows in the week to the Wednesday, Jan. 12 close, according to Refinitiv Lipper.

Boring into those weekly outflows reveals that the high-yield ETFs saw $2.15 billion of outflows on the week, the market source said.

The most recent weekly outflows follow a three-week period of positive flows that totaled $3.9 billion, the source said.

Year to date the combined junk funds have sustained $1.9 billion of net outflows.

That follows the $13.2 billion of net outflows which those funds sustained during the entire year of 2021, according to the market source.

Indexes

The KDP High Yield Daily index fell 10 points to close the day at 65.21 with the yield 4.18%.

The index gained 2 points on Thursday, 11 points on Wednesday and 6 points on Tuesday after falling 20 points on Monday.

The index posted an 11 point loss on the week.

The CDX High Yield 30 index closed Friday flush at 108.38.

The index fell 36 basis points on Thursday after gaining 4 bps on Wednesday, 31 bps on Tuesday and 4 bps on Monday.

The index posted a cumulative gain of 3 bps on the week.

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