Morning Commentary: Yum!, CVR kick off post-holiday new issue market; funds see inflows on Friday

By Paul A. Harris

Portland, Ore., May 31 – The high-yield market was generally quiet at the Tuesday open, trailing the three-day Memorial Day holiday weekend in the United States, according to a trader based on the East Coast.

Cash bonds were trading flat in the mid-morning timeframe on very little news, the source added.

High-yield ETFs were flat to slightly better. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 6 cents, or 0.07%, at $83.75 per share. SPDR Barclays High Yield Bond ETF (JNK), at $35.31 per share, was up 4 cents, or 0.10%.

CVR, Yum! roadshows

The new issue market, which cranked out a blazing $11.2 billion of issuance in the week to last Friday’s early close – the biggest week year to date – pushed another $3 billion onto the showroom floor Tuesday.

Yum! Brands scheduled a New York investor group lunch and global conference call Tuesday for its $2.3 billion two-part offering of senior notes (B1/BB).

The deal, via left bookrunner Goldman Sachs, is comprised of tranches of notes due in 2024, which come with three years of call protection, and notes due in 2026, which come with five years of call protection.

Early yield guidance has the shorter maturity eight-year paper coming at 4¾% to 5%, with the longer-dated 10-year notes expected to come 25 basis points behind the eight-year paper, implying a yield of 5% to 5¼%, a trader said.

Pricing is expected on Thursday, the trader added.

And CVR Partners, LP began a roadshow for a $625 million offering of seven-year senior secured notes set to price later in the present week.

Credit Suisse and UBS are the joint bookrunners.

The market anticipates lighter new issue volume relative to last week’s onslaught of deals, the trader said, adding that the present, holiday foreshortened week could see $5 billion to $7 billion of new deal business.

Friday inflows

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

High-yield ETFs saw $53 million of inflows on the day.

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

Dedicated bank loan funds were strongly positive on Friday, with $155 million of inflows on the day, the trader said.

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