Midday Commentary: Low liquidity hampers high-yield market; cash bonds seen half point lower

By Paul A. Harris

Portland, Ore., Aug. 19 - The high-yield market was lower Monday on exceptionally thin volume, according to a trader based on the East Coast of the United States.

Cash bonds were half a point lower, the source added.

There does not appear to be a lot of activity in last week's new issues, the source added.

The ACI Worldwide, Inc. 6 3/8% senior notes due 2020 (B2/BB-) were 101¾ bid, 102¼ offered on Monday morning.

The deal, which came last Thursday at par in a $300 million issue was 102 1/8 bid late Friday morning.

"Liquidity is just horrendous, which is probably the main reason things are squishy today," the trader remarked.

Another reason is the sizable recent jump in the yield of the 10-year Treasury, the source added. The 10-year went as high as 2.87% on Monday morning, whereas it was yielding below 1.65% in early May.

Higher rates continue to hamper the performance of the low-yielding junk bonds priced during the phenomenal rallies of spring and early summer of 2013.

Against the backdrop of higher Treasury yields the H.J. Heinz Co. 4¼% second-lien senior secured notes due October 2020 have been trading lately in the low 90s, the trader said.

The massive $3.1 billion deal priced at par on March 22.

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