Morning Commentary: Twitter bonds slip 1 point in ‘frozen’ junk market; outflows eyed

By Paul A. Harris

Portland, Ore., Feb. 24 – The high-yield bond market fell ½ point to as much as 1 point on Thursday morning as the world digested news that Russia mounted a full-scale invasion of the Ukraine, a trader said.

With the Dow Jones industrial average down 2% as mid-morning approached, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.33%, or 27 cents, at $82.28.

Bonds priced on Wednesday by Twitter, Inc. – the first high-yield bond deal to clear the market in two weeks – dropped a point overnight and were 98 bid, 99 offered, the trader said.

The Twitter 5% senior notes due March 2030 (Ba2/BB+), a bullet, priced at par in a $1 billion issue on Wednesday afternoon and went out at 99¾ bid, par offered, the source recounted.

Twitter was Thursday morning's most liquid issue, the trader said.

Elsewhere the junk bond market appeared “frozen,” with no apparent forced selling and mostly lowball bids, the source remarked.

It was not immediately apparent that any high-yield sector was performing disproportionate to the rest of the index, in light of the geopolitical headlines out of central Europe, the trader said.

In the Thursday primary market BellRing Distribution, LLC was on deck to price an $840 million offering of 10-year senior notes (B3/B) with initial guidance in the 7% area.

The order book was heard to be at $1 billion late Wednesday.

However, amid Thursday's volatility the market is hearing that the deal is being pulled, sources say.

Wednesday outflows

The dedicated high-yield bond funds sustained $662 million of net outflows on Wednesday, according to a market source.

High-yield ETFs saw $477 million of outflows on the day.

Actively managed high-yield funds sustained $185 million of outflows on Wednesday, the source said.

As the market awaits a weekly report on fund flows from Refinitiv Lipper, the combined high-yield funds are tracking $1 billion of net outflows on the week to Wednesday's close, according to the market source.

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