Morning Commentary: Economic data pushes junk higher; retail accounts, ETFs see inflows

By Paul A. Harris

Portland, Ore., Jan. 6 – Economic data depicting a tamer-than-expected U.S. inflation scenario lifted the capital markets on Friday, sources said.

In the high-yield market, cash bonds were up 3/8 point to as much as ½ point, with the yield of the 10-year Treasury in retreat, a sellside source said.

With the Dow Jones industrial average and the S&P 500 index both up slightly more than 1.5% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up a handsome 0.96%, or 71 cents, at $75.18.

The Chart Industries, Inc. 7½% senior secured notes due January 2030 (Ba3/B+), on-the-run paper issued in late 2022, were up 3/8 of a point, changing hands at 101 7/8 on Friday morning, the sellsider said.

The notes priced at 98.661 to yield 7¾% in a $1.46 billion tranche on Dec. 8.

The primary market remained idle ahead of the weekend, although an anticipated split-rated deal from Regal Rexnord Corp. is generating a modicum of interest among junk-focused investors, sources say.

With its formal announcement to the market still pending, the deal, backing Rexnord's acquisition of Altra Industrial Motion Corp., is expected to be sized at $4 billion and feature four tranches.

Early pricing conversations are in the mid-to-high 200 basis points context, or in general yield context of roughly 6½%, according to a high-yield bond investor, who does not plan to get in the deal.

Fund flows

The dedicated high-yield bond funds saw $121 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs saw $106 million of inflows on the day.

Actively managed high-yield funds saw $15 million of inflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday report that the combined high-yield funds sustained $2.216 billion of net outflows during the week to the Wednesday, Jan. 4 close, according to fund-tracker Refinitiv Lipper.

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