Morning Commentary: Junk slips amid inflation worries; Univision clings to issue price

By Paul A. Harris

Portland, Ore., June 10 – The high-yield bond market opened 1/8 point lower on Friday, then continued to slip as new Consumer Price Index numbers conferred scant hope to investors that the Fed will pause – or even moderate – its anticipated parade of three- to four 50 basis points increases to the benchmark Federal Funds rate in the months ahead, sources said.

The May CPI came in at 8.6% year over year, versus economists' expectations of 8.3%, a trader recounted, adding that Friday's report represents the highest CPI print since 1981.

With the S&P 500 stock index down 2.7% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was off a hefty 1.64%, down $1.26, at $75.68.

Deals priced in Thursday’s $2.35 billion flurry of issuance were generally lower on Friday morning, according to the bond trader.

The new Univision Communications Inc. 7 3/8% senior notes due June 2030 (B1/B+) were 98¾ bid, 99¼ offered in active trading.

The deal went out Thursday at 99 3/8 bid, 99 5/8 offered.

The $500 million issue priced at 99.255 to yield 7½% on an accelerated timeline that brought forward pricing by a day or possibly more (some were expecting the Univision deal to remain in the market over the weekend).

The only Thursday deal to come at the tight end of yield talk, Univision was heard to have been playing to $2.2 billion of demand.

The new Callon Petroleum Co. 7½% senior notes due June 2030 (B3/B/B+) changed hands at 99 7/8 at mid-morning, the trader said, adding that earlier Friday they were 99 bid, 99½ offered.

The $600 million issue – Thursday's sole drive-by – priced at par and broke to par bid, par ½ offered.

The new CDK Global Inc. (Central Parent Inc./Central Parent Merger Sub Inc.) 7¼% senior secured first-lien notes due June 2029 (B1/B+) were wrapped around 99.

The $750 million deal came at par.

The trader saw no activity in the new Maxar Technologies Inc. 7¾% senior secured notes due June 2027 (B2/B) and was marking them just shy of 99.

The $500 million issue priced at par on Thursday.

The new issue bourse remained quiet on Friday morning.

Apart from the strong volatility rocking the global capital markets, it's a summer Friday; so, no news had been expected, the trader said.

There is one deal on the active forward calendar.

Iris Holdings Inc. is on the road with a $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc. by Clearlake Capital Group LP.

Initial guidance has the notes coming with a 10% coupon at an issue price in the low 90s with an all-in yield in the high 11% area to the low 12% area. Pricing is expected on Tuesday.

Fund flows

High-yield ETFs sustained $518 million of outflows on Thursday, according to a market source.

Actively managed high-yield funds were positive on the day, posting $119 million of inflows on Thursday.

News of Thursday's daily fund flows follows a Thursday afternoon report that the combined funds saw $1.34 billion of net inflows in the week to Wednesday's close, according to Refinitiv Lipper.

That followed the previous week's $4.77 billion inflow, which was the asset class’s biggest year-to-date weekly inflow, the market source said.

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