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Morning Commentary: High-yield primary market remains quiet; secondary extends gains
By Abigail W. Adams
Portland, Me., Oct. 28 – The domestic high-yield primary market remained shuttered on Friday with no deals on the horizon.
The forecast for new issuance is low as the market looks to the final two months of the year, sources said.
New deal activity in 2022 is at a historic low with issuance the lightest it’s been since 2008.
The primary market is essentially closed to riskier credits with several leveraged-buyout deals that tried to come to the market shut out, a source.
While rising rates have decimated returns and new deal activity in 2022, credit spreads have held up comparatively well.
The average credit spread during a recession is 550 basis points with the high-yield spreads holding around 500 bps.
“Spreads aren’t that wide,” a source said. “There might be another leg down for credit.”
However, the cash bond market extended its gains in early trading on Friday as ETF buying continued to lift the space.
The market remained well bid for with several offers-wanted-in-competition lists continuing to circulate.
Carnival Corp.’s 10 3/8% senior priority notes due 2028 (B2/B+) continued to gain alongside the broader market.
The notes gained another ¼ point to trade in the 101¼ to 101¾ context in early trade.
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