Morning Commentary: Junk posts gains amid limited trading; primary market remains quiet

By Paul A. Harris

Portland, Ore., Nov. 29 – The high-yield bond market was up ½ point overall on Monday, according to a bond trader based in New York.

Trading was thin, with some buyers looking to purchase bonds at last week's prices, the source noted, adding that there were basically no sellers.

With the major U.S. stock indexes well into the green at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.42%, or 36 cents, at $85.83.

Recent issues have tended to be heavy, the trader said, specifying that the heaviness materialized at least a week ahead of last Wednesday's coronavirus-driven rout in the capital markets.

Notwithstanding that heaviness, it was not difficult to locate recently printed high-yield bonds, which continue to trade at premiums.

The Venture Global Calcasieu Pass LLC 3 7/8% senior secured notes due November 2033 (Ba3/BB), a bullet, was par ½ bid, 101 offered on Monday morning, the trader said.

Despite the tight pricing, the 12-year paper, which came at par in a well oversubscribed, heavily reversed $1.25 billion issue on Nov. 17, traded well on the break and had tracked as high as 101½ bid, 102 offered, the source added.

Reflecting an increased appetite in the market for higher yielding paper, the Warrior Met Coal, Inc. 7 7/8% senior secured notes due December 2028 (B1/BB) continue to trade at a premium.

The new Warrior Met notes were par ¾ bid, 101¼ offered on Monday morning, according to the trader.

Given the high coupon, there has been an expectation that the Warrior Met 7 7/8% notes would generally be tucked away, the trader noted, adding that given such expectations there were more prints than expected as the post-Thanksgiving week got underway.

The $350 million issue priced at 99.343 to yield 8% on Nov. 19.

The Tenet Healthcare Corp. 4 3/8% senior secured second-lien notes due January 2030 (B1/B+/B+) were 99½ bid, par offered on Monday.

The $1.45 billion issue priced at par on Nov. 16, coming in an oversubscribed deal that was driven by strong reverse inquiry.

Among recent deals lagging new issue prices, the new Hertz Corp. senior notes (Caa1/B), the 4 5/8% notes due December 2026 and the 5% notes due 2029, were 98 bid, 98½ offered on Monday.

Hertz priced $1.5 billion across both tranches on Nov. 17.

Both priced at par.

The new issue market remained quiet on Monday, with a couple of the big investment banks telegraphing that issuance could remain light for the rest of the week.

Fund flows

The dedicated high-yield bond funds saw $339 million of net outflows on Friday, according market sources.

Actively managed high-yield funds sustained $345 million of outflows on the day.

High-yield ETFs were flat to slightly positive on the day, posting $6 million of inflows on Friday, a source said.

The combined funds saw $1.03 billion of net outflows last Wednesday (Nov. 24), the source added.

For those returning from the long holiday weekend, the big news on the fund flow front surfaced late last week when Refinitiv Lipper reported that the combined high-yield funds sustained a whopping $3.32 billion of net outflows in the week to the Wednesday, Nov. 24 close.

That was the biggest weekly outflow since the week to last March 10, when the funds posted $5.33 billion of outflows, a source said.

© 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.