Morning Commentary: Junk opens stronger, then fades; new AmeriGas bonds edge higher in secondary

By Paul A. Harris

Portland, Ore., June 21 – The high-yield bond market opened stronger on Tuesday but faded and was essentially unchanged at mid-morning, a trader in New York said.

High-yield ETFs, which were sellers walking out on Monday, were quiet on Tuesday morning.

ETF share prices were flat at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was 3 cents better, or 0.04%, at $83.65 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $35.26 per share, was turning in a slightly better performance, up 0.18%, or 6 cents.

Offers were hard to come by, the trader said, noting that the barrel price of West Texas Intermediate crude oil for July 2016 delivery was down $1.17, or 2.37%, at $48.20.

Amid relatively thin volume in the high-yield secondary market, most activity was in the new AmeriGas Partners, LP bullet notes (Ba3//BB).

The AmeriGas Partners/AmeriGas Finance Corp. 5 5/8% notes due 2024 and the 5 7/8% notes due 2026 were both par bid, par ¼ offered on Tuesday morning.

The $1.35 billion deal came on Monday in a pair of evenly sized $675 million tranches, both of which were priced at par, in the middle of price talk.

Quiet in primary

The new issue market remained becalmed by the pending Brexit vote set for Thursday, when voters in the United Kingdom will decide whether to remain in the European Union or exit it.

The dollar-denominated forward calendar, on Tuesday morning, contained no active issues.

News from Europe that Barcelona-based Cellnex Telecom SA completed a non-deal roadshow last week, via SG CIB and Santander, was the only flicker of life.

In the wake of Cellnex’s meetings with investors there was no visibility on any potential transaction, a London-based sellside source said, adding that it’s no surprise given that the whole market is in a wait-and-see mode ahead of the Brexit vote.

Mixed Monday flows

The daily cash flows of the high-yield mutual funds were mixed on Monday, a debt capital markets banker said.

High-yield ETFs were persuasively positive, seeing $193 million of inflows on the day.

However actively managed funds sustained an eye-popping $540 million of outflows on Monday.

Dedicated bank loan funds also saw negative flows, sustaining $35 million of outflows on Monday, the source said.

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