Owens & Minor in demand; rate sensitive names under pressure; Carnival down

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 22 – High-yield new-issue news continued to come in a slow trickle on Tuesday with one deal on the forward calendar.

Owens & Minor Inc. is slated to price its $500 million offering of eight-year senior notes (B2/B/BB-) on Wednesday with the deal heard to be well oversubscribed.

Meanwhile, the secondary space was mixed on Tuesday with pockets of strength and pockets of weakness.

Rate-sensitive names remained under pressure as the 10-year Treasury yield continued its ascent and settled near the high of the day at 2.385%.

Charter subsidiary CCO Holdings LLC’s 4½% senior notes due 2032 (B1/BB-) and DaVita Inc.’s 3¾% senior notes due 2031 (Ba3/B+) continued their downward trend in active trading.

Occidental Petroleum Corp.’s 3½% senior notes due 2029 (Ba2/BB+) also underperformed the market with the downward trend in the notes more a result of rate concerns than oil futures, sources said.

Carnival Corp.’s 6% senior notes due 2029 (B2/B) were again lower in active trading with the recent rally in oil futures again pressuring the notes.

Meanwhile, outflows continued in the space with ETFs seeing a record daily outflow of $2.26 billion during Monday’s session.

Owens & Minor in demand

High-yield new-issue news continued to come forth in a very slow trickle, on Tuesday.

The active forward calendar contains just one deal.

Owens & Minor is in the market with a $500 million offering of eight-year senior notes (B2/B/BB-), heard to be going well.

The acquisition financing notes have initial guidance in the 7% area and are playing to an order book heard to be three-times oversubscribed with pricing expected on Wednesday, the sellside source said.

Rate-sensitive

While the overall market firmed on Tuesday, rate sensitive names remained under pressure as the 10-year Treasury yield continued to push higher.

CCO Holding’s 4½% senior notes due 2032 continued their downward trend in active trading.

The notes fell about ½ point to a 90-handle.

They were changing hands in the 90 to 90½ context, according to a market source.

There was $15 million in reported volume.

The yield on the notes was about 5.77%.

The 4½% notes have given back much of their gains in last week’s rally over the past two session with the notes falling 2 points since last Friday’s close.

The 4½% notes hit a multi-year low of 88 in last Monday’s sell-off before bouncing back strongly with the broader market.

DaVita’s 3¾% senior notes due 2031 continued to move lower in active trading as investors reduce their rate risk.

The 3¾% notes were off another ¾ point to close the day at 85½, according to a market source.

The yield on the notes was now about 5.865%.

There was $18 million in reported volume.

The notes were also down in active trading on Monday.

Occidental’s 3½% senior notes due 2029 (Ba1/BB+) were also under pressure on Tuesday, which was more a result of rate concerns than crude oil futures, sources said.

The 3½% notes fell about ¾ points to a 98-handle in active trading.

The notes were changing hands in the 98 to 98½ context throughout the session.

They were yielding about 3.78%.

There was $20 million in reported volume.

The notes resumed their downward trend after consolidating around 99¼ over the past two sessions.

The notes were on a strong uptrend in late February amid the surge in crude oil futures.

However, the low coupon notes are rate sensitive and were under pressure alongside other rate sensitive credits on Tuesday, despite elevated crude oil futures.

Carnival down

Carnival’s 6% senior notes due 2029 resumed their downward momentum after surging in last week’s rally.

The 6% notes returned to a 92-handle on Tuesday.

They were changing hands in the 92¼ to 92¾ context throughout the session.

The highly liquid notes were among the most actively traded name in the space with $26 million in reported volume.

After trading to an all-time low of 89 in last Monday’s sell-off, the notes jumped to a 94-handle in last week’s rally.

However, elevated crude oil futures were again pressuring the notes.

While crude oil futures pulled back on Tuesday, they remained above $110 a barrel, a threshold breached during Monday’s session.

WTI crude oil futures settled at $111.76, a decrease of 36 cents or 0.32%; Brent crude oil futures settled at $115.48, a decrease of 14 cents or 0.12%.

ETFs see record outflows

High-yield ETFs sustained record daily cash outflows of $2.26 billion on Monday, the most recent session for which data was available at press time, according to a market source.

HYG bore the brunt, sustaining $1.5 billion of outflows (9% of assets under management) on the day, the source said.

The cash flows of the actively managed high-yield funds were also deep in the red on Monday, at negative-$475 million on the day.

The combined funds are tracking $1.75 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 22 points to close Tuesday at 61.32 with the yield now 5.61%.

The index was down 11 points on Monday.

The CDX High Yield 30 index rose 44 bps to close Tuesday at 105.84.

The index sank 37 bps on Monday.

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