Occidental Petroleum takes ‘hit’; Ford, Royal Caribbean soft in junkland; primary idles

By Paul A. Harris and Cristal Cody

Tupelo, Miss., Aug. 23 – The primary market remained idle on Tuesday, and is apt to remain that way until the conclusion of the extended Labor Day holiday weekend, a bond trader said, but added that one-off deals during the late-summer lull in the high-yield new issue market are never completely out of the question.

Overall financial markets improved Tuesday, after Monday’s volatility, but remained mostly soft with the S&P 500 index down 0.22% and the Nasdaq flat by the finish.

The iShares iBoxx High Yield Corporate Bond ETF rose 19 cents, or 0.25%, to $76.27.

“The market was not as bad as it was yesterday,” a source said. “In general, most things are down with Jackson Hole this week. We saw most things down yesterday as far as a point to ¾ point with the anticipated hawkish tones in the Fed.”

Federal Reserve chair Jerome Powell will speak Friday at the annual Jackson Hole economic symposium. Market participants are widely anticipating another hefty Federal Reserve rate hike at the Sept. 20-21 monetary policy meeting.

Oil prices rallied with the barrel price of West Texas Intermediate crude for October delivery settling up $3.38 at $93.74.

Occidental Petroleum Corp.’s 6 1/8% senior notes due 2031 (Ba1/BB+) took “a hit” Tuesday, a source said.

The bonds were quoted at the end of the day at 106¾, 107¾.

“We were seeing them at 108 to 108¾ this morning,” the market source said.

New issues remained under par but shied away from any wide swings over the session.

Ford Motor Co.’s 6.1% senior green notes due August 2032 (Ba2/BB+) “stayed inside the 99, 99 1/8 trading zone most of the day,” according to a source.

Royal Caribbean Group’s new 11 5/8% senior notes due 2027 (B3/B) were mostly flat on the day but remained softer than issuance after first falling below par on Monday.

“They’re definitely down from last week, but today not much change,” a source said.

Ford steadies

Ford Motor’s 6.1% senior green notes due August 2032 were quoted going out at 99½ bid Tuesday.

“There wasn’t any dramatic movement today,” a source said.

The bonds were seen unchanged over the morning at 98½ bid, 99 offered after declining Monday from the open at 99¼ bid, 99¾ offered.

The drop came following Ford’s announcement Monday of plans to cut 3,000 white-collar jobs.

Ford priced the bonds a week ago on Aug. 16 in a $1.75 billion offering at par, and the notes closed the week wrapped around issuance.

Royal Caribbean soft

Royal Caribbean’s 11 5/8% notes due 2027 traded late Tuesday at 99½ bid, 99¾ offered, a source said.

“They were trading above a par handle, but now we’re seeing them with a below-par handle,” a source said.

The 11 5/8% series first dropped below par on Monday when the notes gave back 1 3/8 points.

Royal Caribbean sold $1.25 billion of the notes Aug. 15 at par with the issue initially climbing to 102 in the secondary market.

$1.07 billion Monday outflows

For the second consecutive session the high-yield ETFs sustained outflows of greater than $1 billion, posting negative $1.07 billion on Monday, the most recent session for which data was available at press time, according to a market source.

The big Monday outflows from the ETFs followed Friday's even-bigger $1.374 billion outflow.

Actively managed high-yield funds were positive on Monday, posting $50 million of inflows on the day, the source said.

The combined funds are tracking a whopping $2.97 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index declined to 55.94 with a 6.82% yield from 56.07 with a 6.82% yield on Monday.

The CDX High Yield 30 index rose to 100.346 from 100.3 on Monday.

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