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Morning Commentary: Junk begins week unchanged as low pre-holiday liquidity takes hold
By Paul A. Harris
Portland, Ore., Dec. 19 – The high-yield bond market opened 1/8 of a point better on Monday but proceeded to relinquish most of that premium and was unchanged at mid-morning, according to a bond trader in New York.
Liquidity was low to begin the week as the coming holidays erode the ranks of market participants, which customarily happens, the trader remarked.
With the major U.S. stock indexes mixed at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.42%, or 31 cents, at $74.29.
Bonds priced by Chart Industries, Inc. in the market’s most recent big, liquid, dollar-denominated deal were unchanged to perhaps slightly better on the morning, the trader said.
The Chart Industries 7½% senior secured notes due January 2030 (Ba3/B+) were par bid, par ½ offered.
The notes priced at 98.661 to yield 7¾% in a $1.46 billion tranche on Dec. 8.
The Chart Industries senior notes due January 2031 (B3/B) were 101¼ bid, 102 offered on Monday.
The unsecured notes priced at 97.949 to yield 9 7/8% in a $510 million tranche, also on Dec. 8.
The $1.97 billion two-part deal was a blowout and indicated pent-up demand for new issuance among high-yield bond investors, market sources say.
The primary market remained quiet as what is expected to be the final week for possible new issuance in 2022 got underway.
The new issue bourse is unlikely to resume operations before the new year, they add.
Fund flows
The dedicated high-yield bond funds sustained $374 million of net daily cash outflows on Friday, according to a market source.
High-yield ETFs saw $344 million of outflows on the day.
Actively managed high-yield funds sustained $30 million of outflows on Friday, the source said.
The combined funds are tracking $1.17 billion of net outflows for the week that will conclude with Wednesday’s close, according to the market source.
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