Morning Commentary: ETF bid continues after record inflow; Twitter to repurchase bonds

By Abigail W. Adams

Portland, Me., Oct. 31 – The domestic high-yield primary market remained dormant on Monday although the market may soon break its silence given recent strength, sources said.

Market players are awaiting news on Pegasus Merger Co.’s $3 billion package of secured and unsecured notes backing Apollo Global Management, Inc.’s acquisition of Tenneco.

News circulated last Friday that the deal would soon be marketed to investors although official details have yet to surface.

The deal, which has been on hold since July, is believed to include a $2 billion tranche of secured notes and a $1 billion tranche of unsecured notes.

While the primary market is expected to soon reactivate given the recent strength in the market, issuers attempting to tap the market will still have to pay steep prices, a source said.

Meanwhile, the rally in the secondary market cooled on Monday although ETFs remained buyers after record inflows.

The pullback in equity markets dampened the risk-on appetite that lifted the cash bond market 2½ points the previous week.

However, the market eked out another 1/8 point gain as the ETF bid continued.

ETFs reported a daily inflow of $2.23 billion on Friday, the largest daily inflow in the history of the market, a source said.

The inflows have helped drive up the broader market with ETFs paying large premiums for paper and driving up prices.

While the broader market continued to benefit from the ETF buying frenzy, Twitter Inc.’s offer to repurchase its outstanding 3 7/8% notes due 2027 and 5% notes due 2030 at the 101 poison put price was the topical news of the day.

Both bonds traded up to a par handle the previous week as Elon Musk prepared to close his $44 billion acquisition of the social media company with the deal completed last Friday.

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