Morning Commentary: Junk off as Treasury yields spike; EnerSys brings $300 million deal

By Paul A. Harris

Portland, Ore., Jan. 3 – With risk-free rates continuing their new year ascent, junk bond prices generically dropped ¼ point to ½ point by mid-morning on Wednesday, according to a bond trader in New York.

At that time, 10-year Treasuries yielded 3.965%. up 0.48% on the morning.

Better buyers retained their grip on the high-yield bond market tiller in the face of the Wednesday morning weakness, the trader specified.

With all the major U.S. stock indexes more than ½ percent in the red at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.56%, or 43 cents, at $76.70.

The GTCR W-2 Merger Sub LLC (Worldpay) 7½% senior secured notes due January 2031, a large, liquid, post-Labor Day issue useful in gauging present market sentiment, were down ¾ of a point on the morning at 104¼ bid, 104¾ offered, the trader said.

Those notes were 105¼ bid, 105½ offered on Tuesday morning, according to sources.

The $2.175 billion deal priced at par last September.

There was Wednesday morning news in the new issue market as it continued its modest push into 2024.

Global Partners LP and co-issuer GLP Finance Corp. talked their $450 million offering eight-year senior notes (B2/B+) to yield 8¼% to 8 3/8%, inside of the 8½% to 8¾% initial guidance.

Order books were three-times deal size at mid-morning Wednesday as official talk circulated, according to the New York trader, who added that the bonds appear poised to print at 8¼%.

The offering is set to price on Wednesday.

Meantime EnerSys announced a $300 million offering of eight-year senior notes (Ba3/BB+), which it expects to price on Thursday.

The market anticipates around $20 billion of January issuance, according to the trader.

Should the primary generate that amount of monthly issuance, or better, it would be robust in the context of recent history.

New issue volume has topped $20 billion in only four of the past 12 months, according to Prospect News data.

The last month in which the primary market topped the $25 billion mark was November 2021 ($32.2 billion), capping a 12-month period during which new issue volume hurtled at a screeching $41.4 billion monthly pace.

By comparison, average monthly issuance during the past 12 months has been $14.9 billion.

Fund flows

The high-yield ETFs sustained big daily cash outflows of $822 million on Tuesday and are on track to post their first weekly net outflows in nine weeks, as the market awaits a Thursday report on the weekly cash flows of the various asset classes from fund-tracker Refinitiv Lipper, a market source said.

Actively managed high-yield funds saw $80 million of daily inflows on Tuesday, according to the market source.

© 2015 Prospect News.
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