Morning Commentary: Junk opens ½ point higher; late-year drive-bys reactivate primary

By Paul A. Harris

Portland, Ore., Dec. 14 – With 10-year Treasuries yielding below 4% for the first time since July, and central bankers roosting with the doves, the lights along the high-yield line flashed green during the early going on Thursday, sources said.

Cash bonds opened half a point higher, and were holding around that level at mid-morning, according to traders in New York.

With the Dow Jones industrial average up 0.19%, at that time, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.58%, or 45 cents, at $77.21.

The GTCR W-2 Merger Sub LLC (Worldpay) 7½% senior secured notes due January 2031, a large, liquid, post-Labor Day issue, was 104 bid, 104½ offered, and appeared bound for 105, up half a point on the morning, in line with the market, a trader said.

The $2.175 billion deal priced at par in mid-September.

Meanwhile in the primary market, dealers parted the late-year tinsel in order to roll out a pair of Thursday drive-by deals.

New York-based insurance brokerage USI Inc. plans to price a $620 million offering of eight-year senior notes (current ratings Caa1/CCC+), in the market with initial talk in the high 7% to 8% area.

And Griffin Global Asset Management Holdings, Ltd. plans to price a $100 million add-on to the GGAM Finance Ltd. 8% senior bullet notes due June 15, 2027.

Price talk is 100.75 to 101, rich to early guidance of 100 to 100.5.

Although year 2023 is getting long in the tooth the new issue market may still have a way to run, especially given the conspicuously supportive market conditions presently in place, sources say.

Friday business is not out of the question, and quick-to-market deals might even appear during the Monday-Tuesday timeframe in the pre-holiday week ahead, they add.

Fund flows

High yield ETFs had a whopping $1.2 billion of daily cash inflows on Wednesday, according to a market source.

Actively managed high-yield funds sustained $112 million of outflows on Wednesday, the source said.

As the market awaits a report on the weekly cash flows of the various asset classes, expected later Thursday from fund-tracker Refinitv Lipper, the combined funds are tracking $950 million of net inflows to the dedicated high-yield bond funds for the week to Wednesday’s close, according to the market source.

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