Morning Commentary: Rocketing risk-free rates pressure bonds; Venture Global on tap

By Paul A. Harris

Portland, Ore., Oct. 19 – Risk-free bond rates remained on the march Thursday morning, creating chop in the capital markets and all but sidelining the high-yield new issue market, according to a bond trader in New York.

The 10-year Treasury was yielding 4.94% at mid-morning, after climbing as high as 4.96% in the early going on Thursday, the trader said.

They began the week at just above 4.7%, the source recounted, conceding that 5%-yielding 10-year government paper is all but a foregone conclusion.

One visceral impact came in the form of wide-to-guidance yield talk on the Venture Global LNG Inc. $4 billion two-part secured mega-deal that is teed up to price Thursday afternoon.

Talk on both tranches came at least 25 basis points wide to early guidance.

A tranche of 5.25-year bullets is talked to yield 9¼% to 9½%, wide to early guidance of 8¾% to 9%.

A tranche of callable 8.25-year notes is talked to yield 9¾% to 10%, wide to early guidance of 9¼% to 9½%.

Tranche sizes remain to be determined.

Elsewhere, recently minted bonds were trading below their issue prices on Thursday morning, sources said.

The Newfold Digital Holdings Group, Inc. 11¾% senior secured notes due October 2028 (B2/B/BB-) were 98¾ bid, 99½ offered, according to the trader.

Earlier in the week those bonds were par ½ bid, 101 offered.

The $515 million dividend funding and debt refinancing deal priced last Friday at par and went out later that day at 101½ bid, 101¾ offered.

The Viper Energy Partners LP 7 3/8% senior notes due November 2031 (Ba3/BBB-/BB-) were 99¼ bid, 99¾ offered on Thursday morning.

They were par ¼ bid on Tuesday.

The $400 million split-rated issue priced at par on the high-yield desk on Oct. 12.

Turning to topical names, the Rite Aid Corp. 8% secured notes due November 2026 were up ½ point on the morning at 71 bid, according to the trader.

The bankrupt Philadelphia-based drugstore operator disclosed plans to close 154 stores in order to hoard cash and address its massive debt.

The broad high-yield bond market was 1/8 of a point to ¼ of a point lower at mid-morning, against a backdrop of softer equity prices, the aforementioned rising risk-free rates and indications that the U.S. economy continues a slow descent, according to market sources.

© 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.