Morning Commentary: High yield opens a touch weaker; Technicals point to pick-up in new issues

By Paul A. Harris

Portland, Ore., Oct. 24 – High-yield bonds and synthetics opened a touch weaker on Friday, according to a trader based on the East Coast of the United States.

However recent issues appear to be performing well in the secondary market, the source said.

The new Graphic Packaging International, Inc. 4 7/8% senior notes due Nov. 15, 2022 (Ba3/BB+) were par ½ bid, par ¾ offered on Friday morning. The $250 million issue priced at par on Thursday afternoon.

The Tesoro Logistics LP and Tesoro Logistics Finance Corp. 5½% senior notes due Oct. 15, 2019 (Ba3/BB) were 101¾ bid, 102 offered. The $500 million deal priced at par on Wednesday.

The Tesoro Logistics 6¼% senior notes due Oct. 15, 2022 (Ba3/BB), which came in the same $1.3 billion two-part deal, were turning in an even stronger performance Friday morning, trading at 102¾ bid, 103 offered, the trader said. The 6¼% notes also priced at par in a tranche sized at $800 million.

Inflows point to calendar

News that dedicated high-yield funds saw $1.7 billion of inflows for the week to Wednesday came as no surprise to high-yield market watchers.

The daily flows for Wednesday were particularly large, according to a debt capital markets banker, who is looking for a substantial pick-up in the forward calendar during the week ahead.

“We've had a correction, and the market has gotten very cheap,” said the banker.

“However the risk-premium has come off during the past week.”

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