Morning Commentary: Positive sentiment lifts junk bonds; hefty ETF inflows continue

By Paul A. Harris

Portland, Ore., Aug. 31 – With equities in the green, and rates a touch tighter to start the day, the junk bond market was ¼ of a point higher at mid-morning on Thursday, according to a high-yield syndicate banker.

The market appears poised to head into September on a positive footing, the source said.

Noting that the past two market sessions have been very positive, the banker remarked that the high-yield index has tightened 20 basis points during the past week.

In muted pre-holiday trading activity, the Tenneco Inc. 8% senior secured notes due November 2028 (B1/B) were 82 bid, yielding 12.83% on Thursday, the banker said, marking the paper unchanged on the morning.

The Tenneco bonds, which came in a mid-August undertaking to syndicate hung bridge loan debt leftover from Apollo’s 2022 buyout of Tenneco, traded at 81¾ on Tuesday, the banker said.

The $1.9 billion issue priced at 85 to yield 11.933% on Aug. 15.

The primary market remained quiet on Thursday morning, and is not expected to reactivate until Tuesday at the conclusion of the extended Labor Day holiday weekend.

However, September promises to be a busy month, market sources say.

The consensus seems to be that the month ahead could see issuance in the context of $20 billion, said the syndicate banker, adding that the post-Labor Day week might see as much as $2 billion to $3 billion of new issue volume.

Fund flows

High-yield ETFs saw $311 million of daily cash inflows on Wednesday, their fourth consecutive strong daily inflow, according to a market source.

To recap, the junk ETFs saw $650 million of inflows on Tuesday, $135 million on Monday and $502 million last Friday.

Actively managed high-yield funds saw $70 million of inflows on Wednesday, the market source said.

As the market awaits a report on the weekly cash flows of the various asset classes, expected later on Thursday from fund-tracker Refinitiv Lipper, the combined high-yield bond funds are tracking $1.2 billion of net inflows on the week to Wednesday’s close, according to the market source.

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