Morning Commentary: New Light and Wonder trades to premium; HY market takes CPI in stride

By Paul A. Harris

Portland, Ore., Aug. 10 – A tame-ish Consumer Price Index report generated notable enthusiasm in the stock market on Thursday morning.

However, the junk bond market appeared to be taking it in stride, according to a bond trader in New York.

The high-yield market was ¼ to ½ point higher on the morning, the trader said, adding that the only indication that Thursday’s CPI report stimulated risk appetite in junkland was a burst of offers-wanted-in-competition (OWICs), mainly from the ETFs, which materialized on the heels of the report.

Most of the headline July CPI numbers came in line with expectations, the exception being year-over-year inflation which came in at 3.2%, versus the 3.3% estimate.

It required a rather hard look to find the great news in the July report, the trader conceded.

However, a portfolio manager countered that if you did take the time to bore down into the CPI numbers there were some encouraging indications in items such as domestic airfares (down 8.1% month-over-month) and used car and truck prices.

Conceding that the high-yield market reacted to the report with less exuberance than the equity markets, the investor said that the market is looking for good news.

With the major U.S. stock indexes all up well over 1% at midmorning the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.37%, or 28 cents, at $75.24

The Brand Industrial Services, Inc. 10 3/8% senior secured notes due August 2030 were up ¼ point on the morning at 101¼ bid, 102 offered.

The $1.335 billion issue priced at par on July 26.

Among more recent issues, the Light and Wonder International, Inc. 7½% senior notes due September 2031 (B3/BB/BB) were trading at a decent-or-better premium to issue price at par ¾ bid, 101¼ offered, after going out Wednesday at par 5/8 bid, 101 1/8 offered.

The $550 million deal, which was heard to have enjoyed an enthusiastic reception among investors, priced at par on Wednesday.

Elsewhere, the morning after found the TransDigm Inc. 6 7/8% senior secured notes due December 2030 (Ba3/B+) wrapped around issue price at 99 7/8 bid, par 1/8 offered, after breaking below par on Wednesday afternoon, the trader said.

The $1.45 billion issue came at par.

In the new issue market the downsized Cushman & Wakefield U.S. Borrower, LLC $400 million offering of eight-year senior secured notes (Ba3/BB) is on deck for Thursday.

The deal was downsized from $500 million on Wednesday, and talked to yield 9¼% to 9½%, inside of initial guidance in the 9¾% area.

Fund flows

The cash flows of the dedicated high-yield funds were very modest on Wednesday, with actively managed funds seeing $17 million of inflows on the day, while the junk ETFs sustained $5 million of outflows, according to a market source.

With the market awaiting a report on the weekly cash flows of the various asset classes from fund-tracker Refinitiv Lipper, the combined high-yield funds are tracking $1.08 billion of net outflows for the week to Wednesday’s close, according to the market source.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.