Morning Commentary: Junk opens 1/8 point better; ams-Osram paper continues to outperform

By Paul A. Harris

Portland, Ore., Nov. 22 – Junk opened 1/8 of a point better on Wednesday ahead of the Thanksgiving holiday in the United States, according to a bond trader in New York.

Both cash bonds and synthetics were holding in around that level at mid-morning, the source added.

With the S&P 500 stock index up 0.33% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was unchanged at $74.95.

The dollar-denominated bonds of Germany-based light fixtures manufacturer ams-Osram AG continued to turn in a strong performance in the secondary market on Wednesday, the trader said.

A dealer paid 102 for the ams-Osram 12¼% senior notes due March 2029 (B2/BB-/BB-) in the early going, according to the source, who added that the paper was better bid on the morning.

Those bonds were wrapped around 101 on Tuesday morning.

The $400 million tranche came last week at 99.087, part of a dollar/euro deal that also featured €625 million of similarly structured 10½% notes due March 2029.

The Avis Budget Car Rental, LLC/Avis Budget Finance, Inc. 8% senior notes due Feb. 15, 2031 (B1/BB-), which have turned in one of the weaker performances among recent issues, were 98½ bid, 99 offered, unchanged on Wednesday morning, the trader said.

The $500 million issue priced at 99.341 in a drive-by last week.

The primary market remained shuttered ahead of the holiday, which will extend into a four-day weekend for some market participants, while others expect to be back to their desks on Friday morning.

Prior to the pre-holiday week, each of the previous two weeks saw junk-rated, dollar-denominated issuance top $8 billion, and a syndicate banker looks for a similar new issue pace in the run-up to year-end.

The banker looks for an additional $10 billion of issuance before the end of 2023.

Junk issuance for 2023 to Thanksgiving ($159.8 billion) is a full 35% above the previous year’s anemic $103.4 billion, for the same interval.

However, the 2023 pre-Thanksgiving total is 42% below the $277.5 billion average pre-Thanksgiving issuance seen over the past five years, according to Prospect News data.

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