Morning Commentary: High yield opens 2017 firm as market awaits calendar, Friday cash flows mixed

By Paul A. Harris

Portland, Ore., Jan. 3 – As market participants returned to their desks after the holidays on Tuesday, high-yield bonds were up around ¼ point against a backdrop of higher stock and oil prices, a portfolio manager said.

High-yield ETFs were also firm on the morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.27%, or 24 cents, at $86.79 per share. The SPDR Barclays High Yield Bond ETF (JNK), trading at $36.54 per share, was up 0.25%, or 9 cents.

Oil prices were also rallying on Tuesday morning.

The barrel price of West Texas Intermediate crude for February 2017 delivery was up $1.33 (2.48%) at $55.05.

That upward move was reflected in the price of at least one of the rich-pricing energy deals that came late last year, the portfolio manager said.

Concho Resources Inc.’s 4 3/8% senior notes due Jan. 15, 2025 (Ba2/BB+) were at 99 bid, 99½ offered on Tuesday.

Although the Concho paper was off late-year highs around par, the 4 3/8% notes, which came at par in a $600 million issue on Dec. 13., were improved from levels as low as 98 5/8 bid seen in the market’s last full week of pre-holiday liquidity, a trader said.

Mixed Friday flows

Cash flows for dedicated high-yield bond funds were mixed last Friday, the portfolio manager said.

High-yield ETFs were essentially flat, posting $9 million of inflows on the day.

Actively managed funds were negative, sustaining $70 million of outflows on Friday.

The daily fund flow information follows a report late last week from Lipper analytics that dedicated high-yield bond funds saw $592 million of weekly inflows for the week which ended at the Dec. 28 close.

Meanwhile investors continued to demonstrate vigorous, trending appetites for floating-rate paper.

Against a backdrop of flat to negative cash flows seen by the junk bond funds, dedicated bank loan funds saw $270 million of daily inflows on Friday.

Awaiting a calendar

As players took their places following the holidays, the market awaited news on the new issue calendar.

No new deals had been announced at mid-morning.

However there are early-year deals to be done, according to sources in the United States and Europe.

TeamHealth Holdings Inc. is expected to show up in January with $1,015,000,000 of high-yield bonds in a bridged deal via Barclays. Proceeds will be used to help fund an LBO of the company by Blackstone.

And Novolex Holdings, Inc. (Flex Acquisition Co. Inc.) is expected to bring $625 million of eight-year senior notes via Credit Suisse, to help fund an LBO by Carlyle Group.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.