Morning Commentary: Tenet’s guidance hits hospitals; ‘Fed-with-a-heart’ hope lifts junk

By Paul A. Harris

Portland, Ore., Oct. 21 – After opening as much as half a point lower on Friday, the high-yield bond market recovered some vitality at mid-morning, in line with equities, sources said.

With the S&P 500 stock index up 0.98% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.52% or 38 cents, at $72.18.

A new version of the “Fed-with-a-heart” narrative – a screed which holds that the central bank might take pity on an ailing economy and back away from expected rate hikes – put another charge into the market on Friday morning, according to a trader in New York, who specified that trading in junk bonds was very light heading into the weekend.

Weaker-than-expected guidance given by Tenet Healthcare Corp. sent the Dallas-based hospital and health care facilities company’s bonds and stocks tumbling on Friday morning, the trader said.

With its share price (NYSE: THC) off 30%, the Tenet Healthcare 6 1/8% senior notes due October 2028 were wrapped around 85, down ¼ of a point after falling as much as 4 points on Thursday, the trader said.

Tenet took the high-yield hospital sector down for the ride, the source added, spotting the CHS/Community Health Systems Inc. 5¼% senior secured notes due May 2030 at 64¼, down 2 points to 3 points.

Turning to recent issues, the Carnival Corp. 10 3/8% senior priority notes due May 2028 (B2/B+) were down ¼ point at 98½ in active trading, the trader said.

The upsized $2.03 billion issue (from $1.25 billion) priced at 98.465 to yield 10¾% last Tuesday.

The most recent deal to clear the market, Carnival played to a big book, flush with $750 million of reverse inquiry, enabling the company to reel in pricing by as much as 75 basis points between the time the deal was announced on Tuesday morning and priced Tuesday afternoon.

The primary market remained quiet on Friday morning, with the active forward calendar all but empty heading into the weekend.

Fund flows

The high-yield ETFs saw a hefty $577 million amount of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $88 million of outflows on Thursday, the source said.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined high-yield bond funds sustained $144 million of net outflows in the week to the Wednesday, Oct. 19 close, according to fund tracker Refinitiv Lipper.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.