Morning Commentary: Junk looks for a bid on Friday; ETFs lower; funds continue to see outflows

By Paul A. Harris

Portland, Ore., Dec. 11 – The junk bond market was looking for a bid heading into the Friday East Coast mid-morning, according to traders.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down $1.47 at $79.67 per share, a 1.81% drop.

SPDR Barclays High Yield Bond ETF (JNK) at $33.85 per share was down 53 cents, 1.54% downward move.

“If you want to buy something, this is your lucky day,” a trader remarked.

“If you want to sell something, good luck.

“There is a massive repricing taking place.”

Another trader saw the Toys 'R' Us-Delaware, Inc. 7 3/8% senior secured notes due Sept. 1, 2016 at 48 bid, and added that the bonds were recently 65 bid. However the source had no information to explain the big drop.

Negative flows

The cash flows of the dedicated high-yield funds remained negative on Thursday, according to a buyside source.

High-yield ETFs saw $181 million of outflows on the day.

Actively managed funds saw $535 million of outflows on Thursday.

That news follows a Thursday afternoon report from Lipper-AMG that the funds saw $3.5 billion of outflows on the week to Wednesday's close.

Meanwhile, dedicated bank loan funds saw $305 million of outflows on Thursday, including $45 million of outflows from bank loan ETFs.

The Thursday outflows from high yield and bank loans were broad based, the buysider said.

Quiet in primary market

There was no fresh primary market news on Friday morning, source said.

Three deals remain on the active forward calendar.

Clear Channel International BV, a unit of Clear Channel Outdoor Holdings, Inc., ran a roadshow for a $225 million offering of five-year senior notes (B2/B) via bookrunner Goldman Sachs.

Kraton Polymers, LLC started a roadshow on Monday for a $425 million offering of eight-year senior notes (B3/CCC+).

The acquisition deal, via Credit Suisse, Nomura and Deutsche Bank, was set to price late this week.

And NGL Energy Partners LP remains in the market with a $300 million offering of five-year senior notes (B2/BB-/BB-), a deal that launched at the end of November.

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