Morning Commentary: High-yield prices decline Wednesday as stocks, Treasury yields fall

By Paul A. Harris

Portland, Ore., Aug. 14 – Junk bond prices declined ¼ point to ½ point on Wednesday morning as the major stock indexes were in general retreat, a sellside source said.

With the Dow Jones industrial average and the S&P 500 index both down more than 2% at mid-morning, the yield on 10-year Treasuries fell below 1.6%.

High-yield ETF share prices were substantially lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.77%, or 67 cents, at $85.66 per share.

Recently priced high-yield bonds tended to be off with the market on Wednesday morning, the sellsider said.

Bonds issued Monday by Tenet Healthcare Corp. in a $4.2 billion megadeal which saw the Dallas-based health care company price three tranches of senior secured first-lien notes (Ba3/BB-) – the most recent issues to clear the market – were off their highs, the sellsider said.

The 4 5/8% notes due September 2024 were par ½ bid, par ¾ offered.

The 4 7/8% notes due January 2026 and the 5 1/8% notes due November 2027 were both par bid.

All three tranches priced at par on Monday.

The Clear Channel Outdoor Holdings, Inc. 5 1/8% senior secured notes due August 2027 (B1/B+) were par ½ bid on Wednesday, versus par 5/8 bid on Tuesday. The $1.25 billion issue priced late last week at par.

Meanwhile the summer new issue window is about to close, according to a syndicate banker, who expects the market to go quiet after Thursday’s close because of the traditionally low liquidity that exists during the last two weeks before Labor Day.

And given the market volatility since last Friday it is doubtful that any high-yield issuers will feel inclined to try the market on Thursday, the banker said.

Tuesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Tuesday, according to a market source.

High-yield ETFs saw hefty inflows of $560 million on the day.

Actively managed high-yield funds saw $25 million of inflows on Tuesday, the source said.

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