Morning Commentary: Junk trades lower as equities fade; funds see outflows Monday

By Paul A. Harris

Portland, Ore., Aug. 30 – After rallying as much a ¼ point at Tuesday's open, junk faded along with stock prices heading into the mid-morning period, according to a debt capital markets syndicate banker in New York.

By mid-morning, cash bonds were ½ point to ¾ point lower, the source said.

With the S&P 500 stock index down 1.17% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.82%, or 62 cents, at $74.90.

Among Summer 2022's sparse selection of new high-yield issues, the Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+) were unchanged on Tuesday morning at 98 1/8 bid, 98 5/8 offered after closing at 98 3/8 on Monday, the syndicate source said.

Those bonds were 99½ bid, par offered last Friday.

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

While new issue volume is extremely muted, in keeping with the late-summer season, there is activity in the primary market.

Tellurian Inc. officially launched a $1 billion notes/warrants project financing deal on Monday.

The offering is comprised of units that include an 11¼% senior secured note due 2027, initial talk 95.5 area, with attached warrants for the company’s common stock.

The deal officially kicks off on a conference call with investors set for 11 a.m. ET on Wednesday.

The units are set to price in the post-Labor Day week. However, timing could be accelerated, according to an informed source.

Sole bookrunner B. Riley Securities, Inc. makes its debut at the helm of a public high-yield deal with this offering.

And U.K.-based staffing solutions company NES Fircroft is in the market with a $300 million offering of senior secured sustainability-linked notes (B2/B).

The Nordic deal is coming from the company’s Norway-based subsidiary NES Fircroft Bondco AS and is in the market via managers ABG Sundal Collier and Pareto Securities.

Investor presentations were set to start this week.

Monday outflows

The dedicated high-yield bond funds sustained $760 million of daily net outflows on Monday, according to a market source.

High-yield ETFs saw $445 million of outflows on the day.

Actively managed high-yield funds sustained $315 million of outflows on Monday, the source said.

The combined funds are tracking $1.2 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

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