Morning Commentary: Junk issuers, including energy, enjoy Tuesday morning rebound

By Paul A. Harris

Portland, Ore., March 10 – With the Dow Jones industrial average up around 3% at the Tuesday open, badly battered junk bonds were up 1 to 2 points, traders said.

Even bonds from the energy sector, where the ongoing impacts of depressed commodity prices were compounded over the weekend by news of a new oil price war between the Russian Federation and Saudi Arabia, got a lift in the early going on Tuesday, according to a New York-based trader.

High quality energy paper certainly improved, the source said.

The WPX Energy, Inc. 4½% senior notes due in January 2030 were up 5 points at 83½ bid.

On Monday those bonds dropped to the high 70s from the low 90s, the trader recounted.

Bonds of distressed Whiting Petroleum Corp., a company in restructuring, were up 3 points on Tuesday morning, the source said.

Damage to fixed income securities from the energy sector was by no means limited to speculative grade bonds on Monday, sources say.

The bonds of some triple-B energy companies fell as much as 40 cents on the dollar during the turbulent day.

Longer-dated bullet paper of companies such as Occidental Petroleum Corp., which some consider a crossover credit, fell into the 60s and 70s on Monday, the trader said.

Away from the volatile energy sector, Monday damage appeared to be relatively contained, the source said.

Netflix, Inc.’s 5½% senior notes due 2022 were unchanged Tuesday morning at 104 7/8 bid, 105¼ offered. Those bonds were trading in the context of 105¾ bid, 106 offered at the end of last week, the source said.

Meanwhile the shutters stayed up in the new issue market on Tuesday morning.

One deal is thought to still be in the market.

Del Monte Foods Inc. is seeking to place $575 million of seven-year senior secured notes (Caa2/CCC+), sources day.

For the time being the deal has gone quiet, they add.

Monday fund flows

The dedicated high-yield bond funds saw $11 million of net inflows on Monday, according to a market source.

High-yield ETFs saw $386 million of inflows on the day.

However actively managed high-yield funds sustained $375 million of outflows on Monday, the source said.

The combined funds are tracking $1.54 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.