Morning Commentary: Junk slips as risk-free yields rebound; Borr trades to premiums

By Paul A. Harris

Portland, Ore., Oct. 25 – The high-yield bond market slipped ¼ of point by mid-morning on Wednesday as volatile risk-free rates resumed their climb, according to market sources.

At that time, with the 10-year Treasury yielding 4.908%, up 6 basis points on the morning, and the Dow Jones industrial average off 0.05%, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.29%, or 21 cents, at $72.38.

Bonds priced late Tuesday by Borr Drilling were trading at handy premiums to their discount new issue prices on Wednesday morning, according to a bond trader in New York.

The Borr IHC Ltd. 10% senior secured notes due 2028 and the 10 3/8% senior secured notes due 2030 (both B3/BB-/B) were both trading at 98½ bid, 99 offered, according to the trader.

The $1.025 billion 2028 tranche priced at 97.5 while the $515 million of 2030 paper came at 97.

Elsewhere, in active Wednesday morning trading the recently minted Venture Global LNG Inc. 9 7/8% senior secured notes due February 2032 traded into a par ½ bid, down ¼ of a point, the trader said, specifying that the move was generally in line with the market.

The $1.5 billion issue priced at par last Thursday.

In the primary market, Cetera Financial Group Inc. might price a $700 million offering of Aretec Escrow Issuer 2 Inc. senior secured notes due August 2030 (B2/B) before Wednesday’s close, the trader said.

Pending official word on price talk and timing, guidance has the notes coming to yield in the high-9% to 10% area.

A brief roadshow was scheduled to wrap up on Tuesday.

Meanwhile, Global Aircraft Leasing Co., Ltd. and Global Sea Containers II Ltd. are believed to still be endeavoring to place $1.95 billion of five-year senior PIK toggle notes (Ba2//BB-), the trader said.

The offer ran a roadshow that started over two weeks ago.

Early in the present week the deal was heard to be in limbo after the prospective issuers rejected covenant changes demanded by an investor representing an anchor order, which would have taken the book above deal-size, sources say.

Fund flows

The dedicated high-yield bond funds sustained $258 million of net daily cash outflows on Tuesday, according to a market source.

High-yield ETFs saw $165 million of outflows on the day.

Actively managed high-yield funds sustained $93 million of outflows on Tuesday, the source said.

The combined funds are tracking $620 million of net outflows for the week that is set to conclude with 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.