Junk secondary rallies as Fed hikes rate 75 bps; Cleveland-Cliffs erases losses; Post rises

By Abigail W. Adams

Portland, Me., June 15 – The domestic high-yield primary market remained silent on Wednesday as the secondary space soared on the heels of the Federal Reserve’s 75 basis points rate hike.

Iris Holdings Inc.’s $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc., the sole deal in the market, was expected to price during Wednesday’s session.

However, there were no new updates on the deal as of press time.

Meanwhile, the cash bond market jumped 1 point on Wednesday, paring losses from the previous three sessions, which saw the market fall by almost 4 points.

Buyers were outnumbering sellers nearly 8-to-1.

While Wednesday’s strong rally was a little “head scratching,” short-covering and ETFs were contributing to the market’s strength, a source said.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) saw a large inflow on Tuesday but ETF arbitrage players were unable to find bonds due to low liquidity, which caused a spike in prices, the source said.

Carvana Co.’s senior notes were among the benefactors of the ETF-driven spike with its capital structure lifted in the rally.

Cleveland-Cliffs Inc.’s 4 5/8% senior notes due 2029 and 4 7/8% senior notes due 2031 (B3//B) continued their upward momentum with the notes wiping out losses from Monday’s sell-off.

Post Holdings, Inc.’s senior notes (B2/B+) were also making large gains in active trading.

Intertape?

There was radio silence on Iris Holdings’ $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group.

Books were expected to close at 11 a.m. ET with pricing to occur shortly thereafter.

However, there were no new updates on the deal as of press time.

Most recent price talk has the deal coming with a 10% coupon at an issue price of 83 to 85 to yield in the context of 13½% to 14%, sources said.

Carvana gains

Carvana’s capital structure was again lifted by Wednesday’s ETF-driven rally.

The used car e-commerce company’s 10¼% senior notes due 2030 (Caa2/CCC) jumped to 85 in early trading after spending much of Tuesday’s session on an 81-handle.

The yield was about 13 3/8%.

The company’s 4 7/8% senior notes due 2029 rose 3½ points to close Wednesday at 62.

The notes were trading with a yield of about 13 1/8%.

Carvana has a 0.29% weight in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG).

Cleveland-Cliffs wipes out losses

Cleveland-Cliffs wiped out losses from Monday’s sell-off which drove its notes to an all-time low.

The mining company’s 4 5/8% senior notes due 2029 jumped another 2 points on Wednesday in heavy volume to close the day at 84 with the yield 5.7%, according to a market source.

There was $16 million in reported volume.

The 4 7/8% senior notes due 2031 gained 2 5/8 points to close the day at 93¾ with the yield also 5.7%.

There was $9 million in reported volume.

The tranches hit their lowest level since pricing in February 2021 on Monday with the 4 5/8% notes down to an 87-handle and the 4 7/8% notes down to an 88-handle.

However, the notes saw a strong bounce off of their lows and are now trading above the levels they were at heading into Monday’s session.

Post on the rise

Post Holdings’ senior notes were on the rise on Wednesday.

Post’s 5 5/8% senior notes due 2028 (B2/B+) rose almost 3 points to close the day at 93¾ with the yield just shy of 7%, according to a market source.

The 5½% senior notes due 2029 rose 2¾ points to close the day at 91 with a yield of 7%.

The cereal, food and nutrition company ranks as one of the strong single-B credits that have been favored by investors in the current market environment.

Indexes

The KDP High Yield Daily index gained 45 points to close Wednesday at 55.2 with the yield now 7.39%.

The index fell 18 points on Tuesday after sinking 143 points on Monday.

The ICE BofAML US High Yield index rose 73 basis points with the year-to-date return now negative-12.21%.

The index fell 54.47 bps on Tuesday after plummeting 212 bps on Monday.

The CDX High Yield 30 index rose 95 bps to close Wednesday at 98.13.

The index inched up 1 bp on Tuesday after sinking 162 bps on Monday.

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