Morning Commentary: Junk improves with risk appetite; new Navacord 8½% notes 101-102

By Paul A. Harris

Portland, Ore., March 3 – The high-yield bond market saw pronounced improvement on Friday as a risk-on sentiment took hold, sources said.

After opening the session 1/8 of a point better, cash bonds were up as much as 3/8 to half a point at mid-morning, traders said.

ETFs, having seen cash inflows on Thursday, were buyers on Friday morning as traders plowed through a stack of offers-wanted-in-competition (OWICs), they added.

With the S&P 500 stock index up 0.82% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.53%, or 40 cents, at $74.36.

Bonds priced Thursday by Navacord Inc. were posting a solid premium on Friday morning, a trader said.

The Jones DesLauriers Insurance Management Inc. (Navacord) 8½% senior secured notes due March 2030 (B2/B-/B+) were 101 bid, 102 offered in muted volume, the source added.

The oversubscribed $500 million issue came Thursday at par.

Navacord put the cap on a respectable week in the new issue market: $5.75 billion in nine junk-rated, dollar-denominated tranches.

The February-March crossover week followed two weeks of near dormancy in the new issue market, during which issuance volume ran at an anemic deal-a-week pace. The total dollar amount of issuance during that entire fortnight was a minuscule $1.49 billion.

The primary market was quiet on Friday morning.

Thursday’s Navacord execution left the active forward calendar empty.

As to the week ahead, there was not a lot of color to be had in the early going on Friday.

Look for Altice to appear, looking to refinance Cablevision Holdings’ debt, a sellside source advised.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a market source.

High-yield ETFs saw $368 million of inflows on the day.

Actively managed high-yield funds, meanwhile, sustained $258 million of outflows on Thursday, the source said.

News of Thursday’s daily outflows follows a Thursday afternoon report that the combined funds sustained $2.31 billion of net outflows in the week to the Wednesday, March 1 close, according to fund-tracker Refinitiv-Lipper.

The week to March 1 is the third consecutive week to see large outflows from the asset class, the market source noted, adding that the total for that period is negative $11.3 billion.

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