Primary, secondary market close for holiday; Tesla one of the few names on the tape

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 24 – The high-yield primary market was quiet on Christmas Eve with new issue activity expected to be over for the year.

Not a creature was stirring in the secondary space either with trading volume only a small fraction of its normal amount.

Tesla Inc.’s junk bond was the most active in the secondary space although the notes were moving sidewise, according to a market source.

While volume was light on Tuesday, Tupperware Brands Corp.’s 4¾% senior notes due 2021 have been active on the street throughout December.

The notes have staged a minor rebound over the past two weeks after a sell-off in early December sparked by downgrade speculation.

Christmas Eve

Christmas Eve saw the junk bond market go quiet, according to a trader keeping watch on a trading desk in New York.

The primary market was quiet, as expected, with no announcements anticipated ahead of the new year.

January new issue activity is expected to get underway within a few days of the market reopening on Thursday, Jan. 2.

And given a continuation of the strong market technicals, and positive economic forces in play during the final weeks of 2019, January could be a big month, some sources say.

Flat

The secondary space ground to a halt on Tuesday with few names on the tape and those that did make an appearance largely trading sidewise, source said.

There was about $295 million in reported volume shortly before the market’s early close with no focus to the trading activity.

Even with the illiquidity, few names saw price movement with the overall secondary market closing Tuesday largely flat.

While markets closed Tuesday with little notable movement, the secondary space logged a solid year with returns surpassing 14% last week.

Tesla trades

Tesla’s junk bond was the most active in the secondary space although the notes were moving sidewise, according to a market source.

The 5.3% senior notes due 2025 were changing hands around 97 on Tuesday with about $8 million in reported volume.

The credit spread on the Caa1/B- rated notes was hovering around 420, according to a market source.

The number is an iconic one for the electric car manufacturer with $420 the tongue-in-cheek takeout price chief executive officer Elon Musk quoted for the company’s stock in the take-private debacle of Aug. 2018.

Tesla’s relationship to the number resurfaced as the subject of headlines and jokes as Tesla stock broke past $420 in intraday trading on Monday.

While Tesla’s 5.3% senior notes were largely unchanged on Tuesday, the notes have steadily climbed throughout the fourth quarter as investor’s express renewed confidence in the company.

The notes were trading on an 88 handle at the start of October, according to Trace data.

Tupperware on watch

While volume was light on Tuesday, Tupperware’s 4¾% senior notes due 2021 have been active throughout December.

The split-rated notes, which were downgraded to BB+ from BBB- by S&P in August, were placed on review for downgrade by Moody’s Investors Service in late November.

News of the potential downgrade sparked a sell-off in the notes, which traded down to the mid-90s in early December, a market source said.

However, the notes have steadily improved and popped back above par in the past two weeks.

While the majority of activity in the notes were odd lot trades on Tuesday, they were wrapped around par.

The 4¾% notes were trading on a 102 handle at the end of October, according to Trace data.

Moody’s placed the kitchen and household products company on review for downgrade due to concern that competitive and economic headwinds and leadership turnover will impair its ability to execute its turnaround strategy, Prospect News reported.

Indexes

Indexes were mixed following Tuesday’s early close with some posting gains and others largely flat.

The KDP High Yield Daily index rose 1 point to close Tuesday at 71.75 with the yield now 4.94%. The index was up 3 bps on Monday after a cumulative gain of 36 bps on the week last week.

The CDX High Yield 30 index rose 7 bps to close Tuesday at 109.61. The index was up 2 bps on Monday after a cumulative gain of 56 bps on the week.

© 2015 Prospect News.
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