Morning Commentary: Junk edges higher in thin trading; NGL Energy bonds up 2 points

By Paul A. Harris

Portland, Ore., Jan. 4 – High-yield bonds were generically ¼ of a point higher, outperforming equities amid thin trading activity on Wednesday morning, according to a trader in New York.

Earnings season has just about gone by, the trader noted, adding that in its wake there is no reason for conspicuous volumes of existing issues to be trading in the secondary market.

“People are waiting for a calendar,” the trader said.

NGL Energy Partners’ bonds were 2 points higher post-earnings, the source said, spotting the NGL Energy Operating LLC/NGL Finance Corp. 7½% senior secured notes due February 2026 at 91¾.

The Tulsa, Okla.-based midstream company reported to its shareholders that it has increased its adjusted EBITDA guidance for the current fiscal year to greater than $630 million from greater than $600 million.

NGL also reported that it reduced its debt balances by approximately $227 million during its third fiscal quarter.

Unsecured notes priced Tuesday by Ford Motor Credit Co. LLC (Ba2/BB+/BB+) saw price improvement on Wednesday morning, the trader said, adding that the 6.95% notes due March 2026 and the 7.35% notes due March 2030 both changed hands at par 3/8.

The 6.95% notes priced Tuesday at 99.873 to yield 7% in a $1.3 billion tranche. The 7.35% notes priced at 99.877 to yield 7 3/8% in a $1.15 billion tranche.

The deal also came with a much smaller floating-rate tranche, the SOFR plus 295 basis points notes due March 2026, which were par bid, par 3/8 offered on Wednesday morning, having priced at par in a $300 million tranche.

The opening junk bond issue of 2023, the oversubscribed Ford Motor Credit deal priced on the investment-grade desk, playing to plenty of pent-up demand from high-yield accounts, sources said.

With all eyes trained on the primary market, it emitted nary a whisper on Wednesday morning.

The active calendar remained empty – its pervading condition since mid-December – with no fresh deal announcements on the day, sources said.

Fund flows

Actively managed high-yield funds sustained $305 million of daily cash outflows on Tuesday, according to a market source.

High-yield ETFs, meanwhile, were positive on the day, posting $159 million of inflows on Tuesday.

The combined funds are tracking $2.49 billion of net outflows for the week that will conclude with Wednesday's close, the market source said.

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