Junk secondary firms; AMC rebounds; Carnival gains continue; Charter tumbles

By Abigail W. Adams and Paul A. Harris

Portland, Me., Dec. 21 – While the primary market is considered closed for the year, there was still some movement in the secondary space.

The cash bond market jumped ½ point on Tuesday as the 10-year Treasury yield declined and crude oil futures and equities jumped.

Several re-opening trade names that had been battered amid concern over a resurgence in Covid rallied on Tuesday.

AMC Entertainment Holdings, Inc.’s 10% senior secured second-lien notes due 2026 (Ca/CCC-) pared their losses from the past week and jumped 2 points during Tuesday’s session.

Carnival Corp.’s junk bonds continued their upward momentum with the 6% senior notes due 2029 trading back up to par.

American Airlines Group Inc.’s 5½% senior notes due 2026 were also on the rise in active trading.

However, Charter Communications’ senior notes continued to tumble with the company’s 3.9% senior notes due 2052 falling below par.

AMC rebounds

AMC’s 10% senior secured second-lien notes due 2026 were on the rise on Tuesday after logging nearly one straight week of losses.

The 10% notes rose 2¼ points in active trading.

They were changing hands at 95 1/8 in the late afternoon.

There was about $12 million in reported volume.

Prior to Tuesday’s session, the 10% notes were trending down strongly amid concern about renewed lockdowns and a slower than anticipated recovery for the box office.

While Tuesday pared AMC’s losses, the notes are still down about 8 points over the past week and a half.

Carnival gains

Carnival’s junk bonds continued to gain on Tuesday with buyers returning to the space.

The cruise line operator’s 6% senior notes due 2029 traded back up to par on Tuesday, a source said.

There was about $10 million in reported volume.

The notes got “beaten down” the previous week alongside other reopening trades amid concern over a resurgence in Covid.

The notes traded as low as 96½ the previous week.

However, they have been on an upward trend since last Friday, a source said.

American Airlines lifts

American Airlines’ 5½% senior notes due 2026 were also on the rise in active trading.

The notes gained about 7/8 point to trade up to 103 3/8 late Tuesday afternoon, a source said.

There was $15 million in reported volume.

Travel demand is expected to remain strong through the holiday season, despite a surge in Covid cases.

Charter under pressure

While the overall market was strong on Tuesday, Charter’s junk bonds remained under pressure.

The 3.9% senior notes due 2052 remained the most active issue in the capital structure with the notes falling below par.

The 3.9% notes tumbled 1 point to 98 7/8 in the late afternoon, according to a market source.

There was about $8 million in reported volume.

The telecommunications company has been under pressure over the past month as President Joe Biden fills spots on the Federal Communications Commission.

The recently appointed FCC chair Jessica Rosenworcel has made the reclassification of broadband as a Title II service a priority, which would increase government oversight of the industry.

Biden’s latest nomination to the FCC also promises to revisit and reinstate the net neutrality rules that were rolled back under the Trump administration.

In addition to a more difficult macro environment, Barclays’s equity analysts reduced their price target for Charter stock on Tuesday.

Cash flows remain positive

High-yield ETFs saw $355 million of daily cash inflows on Monday, according to a market source.

Those follow the $263 million of inflows that the ETFs saw on Friday, and the even more impressive $781 million of inflows that they posted last Thursday.

Meanwhile the actively managed high-yield funds saw $63 million of inflows on Monday, the source said.

The combined funds are tracking $1.72 billion of net inflows for the week that will conclude with Wednesday's close, trailing the previous week's $200 million of net outflows, according to the market source.

Indexes

The KDP High Yield Daily index gained 15 points to close Tuesday at 65.53 with the yield now 4.05%.

The index fell 11 points on Monday.

The CDX High Yield 30 index rose 40 basis points to close Tuesday at 108.75. The index was down 12 bps on Monday.

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