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Morning Commentary: Junk tracks equities lower; ETFs see $1 billion-plus outflows
By Paul A. Harris
Portland, Ore., Oct. 5 – After opening unchanged on Thursday, the high-yield bond market eased slightly toward mid-morning amid weakness in equities, sources said.
Junk was off perhaps 1/8 of a point to as much as ¼ point, a portfolio manager said.
With the Dow Jones Industrial Average off 0.3% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was flat, off 2 cents, or 0.03%, at $72.50.
A bond trader in New York, noting that the junk ETFs closed with decent premiums on Wednesday, said that investors, averse to missing a market bottom, were inclined to buy heading into the Wednesday close.
However, concern about missing the bottom seemed to fade on Thursday morning, the trader said.
The LifePoint Health Inc. 11% senior secured notes due October 2030 (B2/B), the most recent issue to clear the market, was unchanged and untraded on the morning, the source said.
Those bonds were 98¼ bid, 98 3/8 offered on Wednesday.
The $1.1 billion issue priced at par last Friday.
The primary market sat idle on Thursday and is apt to remain so with the approach of the extended Columbus Day holiday weekend, which gets underway following Friday’s close, sources said.
The holiday-abbreviated week ahead is also apt to be a quiet one in the primary market, the portfolio manager said.
The trader, meanwhile, believes that new issuance will remain on hold pending some stability in risk-free rates.
The 10-year Treasury yield, which broke through 4.8% on Tuesday, had retreated to 4.73% by mid-morning on Thursday.
High-yield ETFs sustained $1.118 billion of daily cash outflows on Wednesday, their ninth largest outflow of the year and their largest outflow since Aug. 21, the bond trader said.
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