Morning Commentary: Junk stages modest improvement as market slips into late-year mode

By Paul A. Harris

Portland, Ore., Dec. 14 – The high-yield bond market advanced 1/8 of a point to ¼ of a point on Wednesday morning in follow-on to Tuesday’s CPI-driven rally that saw the year-to-date return of the junk index jump 66 basis points, traders said.

With the S&P 500 stock index up 0.56% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat, up 3 cents (0.04%) at $76.14.

While the high-yield CDX was up 1/8 of point at that time, cash bonds were unchanged, according to a bond trader in New York.

The Chart Industries, Inc. 9½% senior notes due January 2031 (B3/B), the dollar-denominated market's most recent vintage, were 102¾ bid, 103½ offered on Wednesday morning, a trader said.

They traded at 103½ on Tuesday.

Those bonds priced at 97.949 to yield 9 7/8% in a $510 million tranche last Thursday.

The Chart Industries 7½% senior secured notes due January 2030 (Ba3/B+) were 101¾ bid, 102¼ offered on Wednesday morning.

They traded at 102 on Tuesday.

The secured notes, which also priced last Thursday, came at 98.661 to yield 7¾% in a $1.46 billion tranche.

The primary market remained quiet on Wednesday morning, with one trader wondering aloud whether new dollar-denominated high-yield issuance may have run its course for 2022, which has seen the most profound issuance drought in the modern history of the market.

Year-to-date issuance stood at $105.7 billion on Wednesday morning, the lowest amount of yearly issuance since 2008 according to Prospect News data.

A high-yield syndicate banker said that while issuance had been unlikely ahead of the Wednesday conclusion of the Federal Open Market Committee’s December meeting, when the committee is expected to announce a 0.5% increase to the Fed Funds rate, the 2022 primary market could indeed be finished for the year.

The daily cash flows of the high-yield funds were mixed and essentially flat on Tuesday, a trader said.

High-yield ETFs saw $104 million of inflows on the day.

Actively managed high-yield funds sustained $139 million out outflows on Tuesday, the trader said.

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