Morning Commentary: Junk drops as Treasury yields hit three-month highs; outflows eyed

By Paul A. Harris

Portland, Ore., Feb. 21 – With the yield of the 10-year Treasury spiking to three-month highs on Tuesday morning, the junk bond market was off ½ point to as much as 1 point on low volume, according to a bond trader in New York.

The trader spotted 10-year governments yielding 3.93% at mid-morning and added that it appeared to be headed to 4%.

At that time, with the Dow Jones industrial average down 1.4%, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 1.2%, or 89 cents, at $73.67.

The Hanesbrands Inc. 9% senior notes due February 2031 (B1/BB-) were basically unchanged on the morning at par ½ bid, par ¾ offered, the trader said.

That paper was par ½ bid, 101 offered last Friday.

The $600 million blowout deal priced at par on Feb. 10, the most recent session to see any action whatsoever in the dollar-denominated new issue market.

The primary market, which was quiet throughout the past week, remained quiet on Monday morning.

Heading into the past weekend, a syndicate banker professed visibility on a meager $2 billion of potential issuance for the Feb. 21 week but added presciently that spiking rates would almost certainly be an inhibiting force.

Outflows continue

The dedicated high-yield bond funds sustained $1.175 billion of net daily cash outflows on Friday, according to a market source.

High-yield ETFs saw $1 billion of outflows on the day.

That follows the previous session’s massive $2.29 billion of daily outflows from the ETFs.

Actively managed high-yield funds sustained $175 million of outflows on Friday, the source said.

The combined funds are tracking $3.64 billion of net outflows on the week that will 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.