Morning Commentary: High yield eases, but junk ETFs are buyers in early Friday going

By Paul A. Harris

Portland, Ore., Aug. 23 – Junk opened unchanged on Friday but was down as much as an 1/8 point by mid-morning as more headline news bearing upon the trade war between China and the United States created chop in the capital markets, a New York-based bond trader said.

However, high-yield ETFs were buyers on the morning, as traders worked their ways through a considerable number of offers-wanted-in-competition (OWICs), the source added.

Amid decent liquidity for a late summer Friday, bonds sold in mid-July by Sinclair Broadcast Group Inc. were actively trading.

The Diamond Sports Group LLC/Diamond Sports Finance Co. 5 3/8% senior secured notes due August 2026 (Ba2/BB) were unchanged at 104 7/8.

The $3.05 billion issue priced at par on July 18.

The Diamond Sports 6 5/8% senior unsecured notes due August 2027 (B2/B) were also unchanged at 102¾ bid.

The $1,825,000,000 tranche also priced at par on July 18.

The Sirius XM Radio Inc. 5 3/8% senior notes due July 2026 also traded in decent size on Friday morning, according to the source, who had them unchanged on the morning at 106 bid.

Oil prices sustained a substantial drop in the early Friday going.

The barrel price of West Texas Intermediate crude for October 2019 delivery was down 1.92%, or $1.06, at $54.29.

High-yield energy bellwether California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were down 3½ points at 57 bid.

Non-distressed energy names were also under some pressure on Friday morning.

The Antero Midstream Partners LP 5 3/8% senior notes due September 2024 were down a point at 93 5/8 bid, the trader said.

The new issue market remained dormant on Friday morning and is widely expected to stay inactive through the extended Labor Day holiday weekend in the United States, which gets underway following the Friday, Aug. 30 close.

Thursday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Thursday, according to a fixed income investor.

High-yield ETFs saw $192 million of inflows on the day.

Actively managed high-yield funds saw $60 million of inflows on Thursday, the investor said.

News of Thursday's daily flows trails a late Thursday afternoon report that the combined high-yield funds sustained $1.5 billion of outflows in the week to the Aug. 21 close.

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