Morning Commentary: Junk notches lower; ETFs see biggest daily outflow since July

By Paul A. Harris

Portland, Ore., March 15 – After opening unchanged, the high-yield bond market tracked the U.S. stock market into the red by mid-morning, with a trader in New York marking junk 1/8 of a point to ¼ of a point lower at that time.

The decline followed a ¼ point plunge late Thursday as the capital markets in the United States reacted adversely to an inflationary Producer Price Index report, the trader said.

With the S&P 500 stock index down 0.38% at mid-morning Friday, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat at $77.13, up 0.01%.

At that time the TransDigm Inc. 6 3/8% senior secured notes due March 1, 2029 (Ba3/B+) – now a $2.75 billion issue – were clinging to a modest premium to the issue price of Thursday’s $550 million tap: 99 7/8 bid, par offered, the trader said.

TransDigm’s add-on deal priced at 99.75.

Friday morning trading activity, in general, was muted at best, the source said.

The new Aston Martin Lagonda Global Holdings plc 10% senior secured notes due March 2029 (B3/B-/B) were among the morning’s few reasonably active issues at 101 3/8 bid, 101 5/8 offered, according to the trader.

The $960 million tranche came at par, inside of talk, on Wednesday, and was heard to have played to $6 billion of demand.

On the heels of $5 billion of Monday through Thursday dollar-denominated new issue volume, the primary market rested on its oars Friday morning.

The active forward calendar was clear.

Fund flows

High-yield ETFs sustained $1 billion of daily cash outflows on Thursday, according to market source, who added that it is the biggest daily outflow sustained by the junk ETFs since July.

Actively managed high-yield funds saw $136 million of inflows on the day.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds saw $289 million of net inflows on the week to the Wednesday, March 13 close, their second consecutive weekly inflow; the junk funds saw $346 million of net inflows in the week to March 6, the source recounted.

Year to date the combined high-yield funds have seen $1.265 billion of net inflows, according to the market source.

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