Morning Commentary: Junk bonds mixed in post-election trading; bonds of regulated industries gain

By Paul A. Harris

Portland, Ore., Nov. 9 – High-yield bonds were off half a point in early Wednesday trading as the capital markets in the United States digested news of Donald Trump’s victory in the presidential election, a debt capital markets banker said.

High-yield ETFs were lower at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.28%, or 24 cents, at $85.74 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.09 per share, was down 0.39%, or 14 cents.

The capital markets may have been taken by surprise by the Trump victory, but they appear to be holding their water, a market source said, noting that the S&P 500 was flat on the morning.

High-yield bonds in the health care sector were sharply lower as investors contemplate the possibility that a Republican-controlled White House and Congress could repeal the Affordable Care Act.

Bonds of Community Health Systems Inc. were down as much as 5%, according to a portfolio manager.

The FWCT-2 Escrow Corp. (Community Health Systems, Inc.) 6 7/8% senior notes due Feb. 1, 2022 were at 72 bid, 73 offered on Wednesday morning, the investor said, noting that the paper traded at 85 on Oct. 25.

Elsewhere in the sector Tenet Healthcare Corp. paper was down as much as 4% and HCA Holdings, Inc. was down as much as 2%.

However there were also winners in the wake of the election, the investor noted, saying that all the highly regulated industries, including energy, telecom and the financials, were better on Wednesday.

Primary quiet

There was no fresh news in the high-yield primary market, sources said.

On Tuesday Telesat Canada downsized its offering of eight-year senior notes (B3/B) to $500 million from $750 million.

Concurrently with the decrease in the notes offer the company upsized its term loan to $2.43 billion from $2.18 billion.

The notes are talked to yield 8¾% to 9%, wider than earlier guidance of 8½% to 8¾%.

There is $800 million in the book for the bond deal, which is in the market via JP. Morgan, Credit Suisse, Goldman Sachs and Morgan Stanley.

Books were scheduled to close this morning, and the deal was set to price later Wednesday.

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