Morning Commentary: Hospital bonds lifted by better-than-expected earnings; inflows eyed

By Paul A. Harris

Portland, Ore., July 22 – The high-yield bond market opened 1/8 of a point higher on Friday and appeared to be gaining some momentum into the mid-morning period, sources said.

Against a backdrop of mixed trading in equities, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.29%, or 22 cents, at $77.21.

Better-than-expected earnings reports from high-yield hospital names sent bonds in that sector up half a point, a sellside source said.

The Tenet Healthcare Corp. 6 1/8% senior notes due October 2028 traded Friday morning at par, up ½ point.

Also lifted were the bonds of investment-grade rated HCA Inc., including those which continue to trade on the high-yield desk, the source said.

For example, the HCA 5 3/8% senior notes due February 2025 were 101¼ in round lot trading, up from par ¾ on Thursday, according to the sellsider.

Shares of the Nashville-based hospital company (NYSE: HCA) were up 14½% at mid-morning.

Away from hospital names, undertaker Service Corp. International's 4 5/8% senior notes due December 2027 were 98 bid, 98½ offered on Friday morning, the sellsider said, noting that they were laid to rest Thursday at 97½, and so were ¾ of a point better on the morning.

The new issue market remained quiet as the market headed into the weekend with only one deal on the active forward calendar.

Patagonia Holdco LLC is on the road with a $500 million offering of seven-year senior secured first-lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Initial guidance specifies a 7½% coupon at OID 86.

Pricing is set for the week ahead.

Big inflows continue

The dedicated high-yield bond funds saw a whopping $1.82 billion of net daily inflows of cash on Thursday, according to a market source.

Actively managed funds saw $1.34 billion of inflows on the day, the source said, noting that those inflows were broad-based.

High-yield ETFs saw $480 million of inflows on Thursday, to add to the $1.03 billion of daily inflows that the ETFs saw on Wednesday.

News of Thursday's daily flows trailed a Thursday afternoon report that the combined funds sustained $885 million of net outflows in the week to Wednesday's close, according to Refinitiv Lipper.

It was the fifth outflow in six weeks, although the negative flows moderated as the period progressed, the market source said.

The combined funds have sustained $45.8 billion of net outflows for the year to Thursday's close, according to the market source.

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