Morning Commentary: Junk opens flat; Charter bonds soften on merger prospects; funds see inflows

By Paul A. Harris

Portland, Ore., Jan. 27 – High-yield bonds were flat on Friday morning, according to a trader.

There are one or two pockets of softness, but on the whole there is an underlying bid to the market, the trader added.

Against a backdrop of flat to softer stock prices, high-yield ETFs were flat at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 3 cents, or 0.03%, at $87.56 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.97 per share, was down a penny, or 0.01%.

Bonds of Charter Communications, Inc. were softer on the morning after the Wall Street Journal reported that Verizon is exploring a possible merger with Charter, the trader said.

Charter's recently minted CCO Holdings, LLC/CCO Holdings Capital Corp. 5 1/8% senior notes due May 1, 2027 (B1/BB+/BB+) were down ¾ of a point on the morning at 101½ bid, 102 offered.

The $1 billion issue priced at par on Jan. 17.

Three deals on deck

Although there was no fresh news in the primary market, there are three deals on deck to price before the weekend.

Trinidad Drilling Ltd. is in the market with a $350 million offering of seven-year senior notes (Caa1/BB-) talked to yield in the 6¾% area.

The debt refinancing deal is three-times oversubscribed and could come at 6 5/8%, a market source said.

Timing is accelerated; the deal was previously expected to remain in the market into the week ahead.

Jacobs Entertainment, Inc. is selling a $340 million offering of seven-year second-lien senior secured notes (B2) talked to yield in the 8% area.

And WildHorse Resource Development Corp. plans to price a $300 million offering of eight-year senior notes (Caa1/B) talked to yield 6¾% to 7%.

All three deals are said to be oversubscribed and going well, sources say.

Look for two deal announcements later Friday from BofA Merrill Lynch for business that will be in the market during the week ahead, the trader advised.

With the end of the month in view there is not a lot of visibility on the new deal pipeline; however, the 2017 high-yield primary appears to be shaping up with a run rate of around a $20 billion per week, the source added.

Thursday inflows

The cash flows of the dedicated high-yield bond funds were positive on Thursday, the trader said.

High-yield ETFs saw $299 million of inflows on the day.

Actively managed funds saw $35 million of inflows on Thursday.

The news follows a Thursday afternoon report from Lipper US Fund Flows that the dedicated high-yield bond funds sustained $532 million of outflows during the week to Wednesday's close.

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