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Morning Commentary: Junk bonds rally; ETFs reversing early week outflows; ArcelorMittal on tap
By Paul A. Harris
Portland, Ore., Jan. 8 – High-yield bonds rallied into the mid-morning, tracking massive rallies in European stocks, according to a trader on the East Coast of the United States.
Heading into the New York mid-morning, the DAX was up 2½%, and the FTSE was up 2%, the trader said, noting that those rallies appear to be fueled by the expectation of further economic stimulus – in the form of asset purchases – from the European Central Bank trailing news of euro zone deflation earlier in the week.
The CDX North American High Yield Index Series 23 was up a solid 3/8 point heading into the mid-morning, at 105½ bid, 105 5/8 offered.
In the face of oil prices that were flat to slightly weaker, Thursday’s early rally extended to bonds in the battered energy sector, the trader said.
The California Resources Corp. 6% senior notes due Nov. 15, 2024 (Ba1/BB) were wrapped around 81, up a point on the day.
Among higher beta paper the iHeartCommunications, Inc. 14% PIK notes due 2021 were 83¼ bid, 83¾ offered, up 1½ to 2 points.
“We’ll see if this rally keeps its steam once the European markets close,” the trader remarked.
ArcelorMittal teed up
The first junk deal of 2015 will print with a euro sign.
ArcelorMittal launched a €750 million offering of seven-year senior notes (Ba1/BB+/BB+) at mid-swaps plus 265 basis points on Thursday.
Books are closed and final terms are expected shortly.
The quick-to-market deal was announced earlier in the session at benchmark size.
The spread is coming at the tight end of the 265 bps to 270 bps final spread talk. Earlier guidance was mid-swaps plus 275 bps to 280 bps.
The deal is playing to €2.2 billion of demand.
Final terms are expected shortly.
Joint bookrunner BNP Paribas will bill and deliver. Deutsche Bank, Santander and SG CIB are also joint bookrunners.
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