Morning Commentary: High-yield market goes quiet ahead of holidays; ETFs see solid inflows

By Paul A. Harris

Portland, Ore., Dec. 23 – The pre-holiday junk bond market was completely quiet at mid-morning on Friday, according to trader based on the East Coast of the United States, who was anticipating an opportunity to leave the office at midday.

High-yield ETFs were flat on the morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down a penny, or 0.01%, at $86.43 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.56 per share, was unchanged.

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to the trader.

High-yield ETFS saw solid inflows of $219 million on the day.

However actively managed high-yield funds sustained $80 million of outflows on Thursday.

The news follows a Thursday afternoon report from Lipper US Fund Flows that the dedicated high-yield funds saw $19 million of outflows on the week to Wednesday's close.

Meanwhile the daily cash flows of the dedicated bank loan funds remained robust on Thursday, the trader said.

The loan funds saw $445 million of inflows on the day.

Recent energy deals mixed

New issues from the energy sector that were priced in the waning days of 2016 were turning in mixed secondary market performances as the year was closing out.

Deals notable for their tight executions continued to perform sluggishly, the trader said on Friday.

The Concho Resources Inc. 4 3/8% senior notes due Jan. 15, 2025 (Ba2/BB+) were wrapped around par on Friday, the trader said.

The $600 million issue priced at par on Dec. 13.

Meanwhile the Antero Resources Corp. 5% senior notes due March 1, 2025 (Ba3/BB) were 97¾ bid, 98½ offered.

That deal came at par on Dec. 7.

All was quiet in the primary market at mid-morning, with the expectation that it would remain so into the new year.

Following a couple of small, early week new issues, word went out on Wednesday that Baffinland Iron Mines Corp., which has been in the market since Dec. 9 with a $350 million offering of five-year senior secured notes (Caa1/B-) – now the sole deal on the active forward calendar – restructured the bonds and made investor friendly covenant changes.

There were no follow-up announcements, such as timing and price talk, however.

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