Morning Commentary: Tamer CPI print sparks high-yield bid; Allegiant Travel notes on tap

By Paul A. Harris

Portland, Ore., Aug. 10 – Capital markets exuberance followed close on the heels of a Wednesday report that key figures in the July Consumer Price Index came in below levels that economists were fearing, according to a debt capital markets sellside source in New York.

Withholding judgment as to whether that exuberance is rational or irrational, the sellsider said that upon release of the July CPI, junk bonds immediately caught a bid, which was perhaps most clearly expressed in a burst of offers-wanted-in-competition (OWICs), primarily from the high-yield ETFs.

In its Wednesday report on the July CPI, the U.S. Bureau of Labor Statistics said that July consumer prices were unchanged from the previous month, whereas economists were expecting an increase of 0.2%. The report also marked year-over-year inflation at 8.5%, below the expected 8.7% annual rate.

Bonds priced late last week by Charter Communications, Inc., the CCO Holdings, LLC/CCO Holdings Capital Corp. 6 3/8% senior notes due 2029 (B1/BB-), improved to par ¼ bid following the CPI release, prior to which they had traded slightly below par, the sellsider said.

The upsized $1.5 billion deal (from $1 billion) priced last Thursday at par.

Charter's latest issue was one of three deals to clear the market in the past week, and all three were trading above their par issue prices on Wednesday morning, the sellsider said.

The NFP Corp. 7½% senior secured notes due October 2030 (B1/B) were 101 bid, 101¾ offered. They were par 1/8 bid, par 5/8 offered on Tuesday.

The upsized $350 million issue (from $300 million) priced Monday at par.

The Advisor Group Holdings, Inc. 8 5/8% senior secured notes due 2027 (B2/B-/B) last changed hands at 102, the trader said.

The upsized $500 million deal (from $475 million) priced last Thursday at par.

Shortly after the CPI was announced, the lights came up in the primary market.

Allegiant Travel Co. plans to price a $500 million offering of five-year senior secured first-lien notes (expected ratings Ba3/BB-/BB+) in a Wednesday drive-by.

Initial guidance has the notes coming to yield in the 7¾% area, according to the sellsider, who added that the $500 million deal came into the market already oversubscribed, with $750 million of reverse inquiry.

Tuesday outflows

The dedicated high-yield bond funds sustained large net outflows of $839 million on Tuesday, according to a market source.

The negative flows were heavily concentrated in the high-yield ETFs, which saw $734 million of outflows on the day.

Actively managed high-yield funds sustained $105 million of outflows on Tuesday, the source said.

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