Junk bonds pare daily loss, gain over week; Citrix retracts; Option Care, McAfee gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 2 – The domestic high-yield primary market put up a goose egg for the post-Thanksgiving week with no deals priced or announced on Friday.

However, there were signs of life from the European market with Intrum AB arranging fixed-income investors meetings ahead of an expected €300 million 5.25-year senior unsecured bond offer.

There was also market chatter about dollar-denominated issuers running non-deal roadshows in the week ahead.

Meanwhile, the high-yield secondary space remained resilient on Friday after a stronger-than-expected U.S. non-farm payroll report called into question the risk-on rally sparked by Federal Reserve chair Jerome Powell’s Wednesday comments.

While the cash bond market opened the day down ½ point, it pared its losses to close the day only nominally softer, sources said.

The CDX index shed 1 point following the release of the payroll report, but also erased losses as the session progressed to close the day off 1/8.

There was a burst of bids-wanted-in-competition lists following the release of the non-farm payrolls report; however, buyers quickly emerged with offers-wanted-in-competition lists once again outnumbering BWICs by a large ratio.

While volatile, liquidity in the secondary space continued to diminish with volume light outside of large, liquid issues.

Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured notes due 2029 (B2/B) pulled back after hitting a new all-time high the previous session.

Option Care Health, Inc.’s 4 3/8% senior notes due 2029 (B3/B-) made strong gains on Friday.

Condor Merger Sub, Inc.’s (McAfee Corp.) 7 3/8% senior notes due 2030 (Caa2/CCC+) also made large strides upward in a busy session for the issue.

Primary eyed

Intrum AB announced in a that it has arranged meetings with fixed-income investors beginning Monday, ahead of a €300 million 5.25-year senior unsecured bond offer, subject to market conditions.

The “market conditions” caveat sets the bar rather high, given the capital markets’ gyrations of the past week, sources say.

Remarks made Wednesday at the Brookings Institution by Fed chair Jerome Powell, telegraphing a more moderate approach to raising rates, sparked a rally in risk assets.

However, buyers vanished in the immediate aftermath of Friday's non-farm payrolls report which indicated that unambiguous inflationary dynamics still obtain, with respect to the labor force.

Immediately after the early Friday release of that report cash bonds dropped 7/8 of a point, a trader said.

However, the market retraced nearly all of that lost ground by the session's close, the source added.

The conspicuous post-Thanksgiving week's gyrations suggest that the market continues to believe risk asset valuations are linked to accommodative monetary policies, the trader said.

Indeed, the less-than-accommodative Fed of 2022 appears to have already choked off access to the highest of the high-beta, high-yield issuers.

The last issuer to finish a deal with triple-C ratings came in early June when Iris Holdings Inc. priced a $400 million issue of 10% 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc.

That deal came at 82 to yield 14.361%.

Citrix pulls back

Citrix’s 6½% senior secured notes due 2029 pulled back on Friday after hitting the apex of its trading range the previous session.

The 6½% notes were off ½ to ¾ points with the notes returning to an 87-handle, a source said.

They were changing hands in the 87¼ to 87¾ context in active trade.

There was $13 million in reported volume.

The 6½% notes broke out to an 88-handle the previous session with the notes trading as high as 88½ and closing the day wrapped around 88, a source said.

Thursday’s level marked the highest for the notes since the $4 billion issue, which priced at 83.561, broke for trade on Sept. 20.

Option Care on the rise

Option Care’s 4 3/8% senior notes due 2029 made strong gains during Friday’s session.

The notes jumped 2.5 to 3 points.

They were trading just shy of 91½ with the yield about 5.9%, a source said.

The notes have seen a dramatic run-up over the past week with the notes opening Monday on an 85-handle.

McAfee gains

McAfee’s 7 3/8% senior notes due 2030 made large gains in active trade.

The 7 3/8% notes climbed 2½ points to trade in the 85¾ to 86 context heading into the market close.

The notes now carry a yield of about 10 1/8%.

The notes have made large gains over the past two sessions with the notes entering Wednesday’s session on an 82-handle.

Fund flows

High-yield ETFs saw a hefty $794 million of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds saw negative flows, as they sustained $160 million of outflows on the day, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds saw $1.712 billion of net outflows during the week to the Wednesday, Nov. 30 close, according to Refinitiv Lipper.

Indexes

The KDP High Yield Daily index fell 15 points to close Friday at 52.60 with the yield 7.15%.

The index was up 53 points on Thursday and 23 points on Wednesday after sliding 9 points on Tuesday and 7 points on Monday.

The index posted a cumulative gain of 45 points.

The CDX High Yield 30 index fell 19 basis points to close Friday at 101.46.

The index was down 23 bps on Thursday, gained 100 bps on Wednesday and 17 bps on Tuesday after falling 87.5 bps on Monday.

The index posted a cumulative gain of 10.5 bps.

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