Morning Commentary: Junk opens unchanged to slightly firmer in muted late-summer trading

By Paul A. Harris

Portland, Ore., Aug. 25 – The high-yield bond market opened Thursday unchanged to slightly firmer, up perhaps 1/8 of a point, in line with stocks, according to a bond trader in the New York area.

Trading activity was muted at best, the source specified.

With the Dow Jones industrial average up 0.41% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.38%, or 29 cents, at $76.65.

There was activity in the debt securities of motion picture exhibitor AMC Entertainment Inc., the trader said, recounting how the company recently capitalized on the improvement of its share price resulting from the status it enjoys among meme stock investors, and sold preferred shares earlier in the week in a move that stake-holders perceive as dilutive.

With the disapproval of equity investors reflected in the nearly 10% drop in AMC's stock price that ensued (NYSE: AMC), for bond investors the preferred deal represents a bigger equity cushion, the source said, adding that the AMC Entertainment Holdings Inc. 10% notes due June 2026 were up ¼ point on the morning.

Bonds of FXI Holdings, Inc., including the 7 7/8% senior secured notes due November 2024 and the 12¼% senior secured notes due November 2026, improved by ½ point in heavy volume, recovering losses sustained following an earnings report last week, sources said.

The 12¼% notes were 85 bid, 85½ offered at mid-morning, a trader said.

Among recent issues, the Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+) were 99¼ bid, 99¾ offered with better buyers on Thursday morning, the trader said.

Those bonds were seen earlier in the week as low as 98½ bid, 99 offered, sources said.

The new Ford green bonds came at par on Aug. 16 in a $1.75 billion high-grade-style execution.

In an otherwise quiet primary market, a Norway-based subsidiary of U.K. staffing solutions company NES Fircroft is in the market with a $300 million offering of NES Fircroft Bondco AS senior secured sustainability-linked notes (B2/B), a Nordic deal coming via ABG Sundal Collier and Pareto Securities.

Investor presentations start during the Aug. 29 week.

Interest in the deal among high-yield investors in the United States appears to be limited at best, the New York-based trader said on Thursday.

Elsewhere, the dollar-denominated new issue market remained quiet and is not expected to reactivate before the Labor Day holiday weekend, which begins following the Sept. 2 close.

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