Morning Commentary: CPI uptick sends junk lower; Lottomatica markets €350 million notes

By Paul A. Harris

Portland, Ore., Sept. 13 – A disappointing Consumer Price Index report sent global capital markets spiraling lower on Tuesday, with high-yield bonds going along for at least part of the ride down, sources said.

After opening unchanged to perhaps 1/8 of a point better, the junk market tumbled 7/8 of a point on the heels of the CPI release, a sellside source said.

The report indicated that inflation persisted last month despite a 10.1% decline in the price of gasoline during August, a metric that investors hoped would ultimately cool the CPI, and perhaps moderate the hand of the Federal Open Market Committee when it meets next week to consider interest rates.

With the S&P 500 stock index down 3.03% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down a whopping 1.53%, or $1.17, at $74.88.

The CNX Resources Corp. 7 3/8% senior notes due Jan. 15, 2031 (B1/BB/BB+) were 99 bid, 99½ offered, down a point from Monday's closing levels, the sellsider said.

The $500 million issue priced at par, with dealers reeling in half a percent of rate during the few hours that the drive-by deal was in the market (initial guidance had it coming in the 7¾% area).

The Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+) were down a little more than a point on Tuesday morning, as they changed hands at 97½, the sellsider said.

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

There was no fresh news in the dollar-denominated new issue market, with all eyes trained on the Picard Midco, Inc. $4 billion offering of 6.5-year senior secured notes backing the buyout of Citrix Systems Inc. by Vista Equity Partners and Evergreen Coast Capital Corp.

That deal was set to officially launch on a Tuesday morning investor call.

Initial guidance has been in the high 8% area.

Meanwhile, in the euro-denominated new issue market, Italy-based multinational gaming company Lottomatica SpA was scheduled to kick off a €350 million offering of five-year senior secured notes (B2/B) on Tuesday.

Initial guidance has those notes coming to yield in the 10% area.

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