Morning Commentary: Junk opens flat; new Tenet paper mixed in secondary; CalAtlantic drives by

By Paul A. Harris

Portland, Ore., June 6 – The high-yield bond market opened flat on Tuesday; however, rate-sensitive bonds were pretty well bid on the back of a precipitous decline in Treasury rates, a trader said.

Earlier on Tuesday the yield on 10-year government paper fell to 2.13%, the lowest since last November's presidential election, according to a market source.

Against a backdrop of flat to slightly lower stock prices the SPDR Blmbg Barclays High Yield Bd ETF (JNK) was off 3 cents (0.09%) at $37.23 per share at midmorning.

Looking at bonds that priced during Monday's big $5.07 billion session in the new issue market, paper that came in a massive $3.78 billion multi-tranche deal from Tenet Healthcare Corp. was mixed on Tuesday morning.

The Tenet Healthcare and THC Escrow Corp., III (“Escrow”) 4 5/8% secured first-lien notes due July 15, 2024 (Ba3/BB-/BB-) were par 1/8 bid, par 3/8 offered on Tuesday morning.

The Escrow 5 1/8% second-lien notes due May 1, 2025 (Ba3/B-/B-) were par 1/8 bid.

The deal's sole unsecured tranche, the Escrow 7% senior notes due Aug. 1, 2025 (Caa1/CCC+/B-), were lagging new issue price at 99 7/8 bid.

All of Tenet's new paper priced at par on Tuesday.

Elsewhere the new Nokia Corp. five- and 10-year bullets (Ba1/BB+), which priced high-grade style at spreads to Treasuries on Monday, were seen trading at higher dollar prices on Tuesday.

The 3 3/8% notes due June 12, 2022 were par ½ bid at midmorning on Tuesday versus the 99.499 issue price.

The Nokia 4 3/8% notes due June 12, 2027 were par 7/8 bid. The 10-year paper came at a dollar price of 99.591.

CalAtlantic drive by

In a comparatively quiet primary market CalAtlantic Group, Inc. plans to price a $300 million offering of 10-year senior bullet notes (expected ratings Ba2/BB) on Tuesday.

Early guidance has the deal shaping up to yield 5% to 5¼%, a trader said.

Citigroup Global Markets Inc. is the lead bookrunner.

The Irvine, Calif.-based homebuilder plans to use the proceeds for general corporate purposes, which may include the repayment of its convertible notes due 2032.

Monday outflows

The daily cash flows of the dedicated high-yield bond funds were modestly negative on Monday, according to a trader.

High-yield ETFs saw $47 million of outflows on the day.

Actively managed funds sustained $45 million of outflows on Monday.

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