Risk off in high-yield secondary; Energizer, Twitter below par; Macy’s ‘melts’; BellRing falls

By Abigail W. Adams

Portland, Me., March 4 – The domestic high-yield bond primary market was quiet on Friday with the forward calendar empty heading into the coming week.

While there was some activity over the past week with four deals totaling $2.19 billion clearing the primary space, new issuance has been sidelined by the volatility in markets, sources said.

The volatility continued on Friday with the secondary space down ¼ point early in the session. Selling intensified as the session progressed with the market poised to close the day down ½ point.

While the 10-year Treasury yield sank over 100 basis points to close Friday at 1.736%, it did little to bolster the secondary space, which was firmly risk off following Russia’s attack on a nuclear reactor.

Market players were de-risking into the weekend, a source said. “That’s too much time for stuff to go wrong,” a source said.

While the deals to price over the past week were putting in strong performances despite the pressure on the market, they gave up most of their gains during Friday’s session.

Energizer Holdings, Inc.’s new 6½% notes due 2027 (B2/B) sank below par on Friday after trading with a small premium on the break.

Macy's Retail Holdings LLC’s two tranches of senior notes (Ba2/BB/BBB-) fell to a par-handle on Friday, their lowest level in the aftermarket since breaking for trade.

BellRing Distribution, LLC’s 7% senior notes due 2030 (B3/B) also fell to a par-handle after closing out the previous session on a 102-handle.

Twitter, Inc.’s 5% senior notes due 2030 (Ba2/BB+) were also under pressure on Friday and sank below par in active trading.

Energizer below par

Energizer’s 6½% notes due 2027 (B2/B) sank below par on Friday after trading at a premium to their issue price on the break.

The notes were marked at 99 5/8 bid, 99 7/8 offered early in the session, a context they continued to trade in heading into the market close, sources said.

There was $27 million in reported volume.

The notes closed the previous session at par ¼ bid, par ¾ offered.

General market conditions were driving the notes lower, a source said.

Energizer priced an upsized $300 million, from $250 million, issue of the 6½% notes at par to yield 6.502% on Thursday.

Pricing came near the tight end of yield talk in the 6 5/8% area.

Macy’s ‘melts’

Macy’s two tranches of senior notes sank to a par-handle in Friday’s sell-off.

The 5 7/8% notes due 2030 and 6 1/8% notes due 2032 continued to move at roughly the same levels. Both issues launched the day at 101 bid, 101¼ offered.

However, they quickly traded down to trade in the par ½ to par ¾ context.

“They’re melting down pretty quickly,” a source said.

Each tranche saw about $30 million in reported volume.

Friday’s level marks the lowest for the notes since they priced at par on March 2.

The notes traded as high as 102 after breaking for trade but settled in to trade largely on a 101-handle.

Some sources were surprised to see the new tranches from the department store chain trade so well.

However, the notes priced well wide of the BB index, a source said.

BellRing sells

BellRing’s 7% senior notes due 2030 dropped more than 1 point on Friday as the notes came under selling pressure.

The notes were changing hands in the par ¾ to 101¼ context during Friday’s session.

There was $18 million in reported volume.

Friday’s level also marked the lowest for the notes since they priced at par on March 1.

The notes closed the previous session on a 102-handle.

Twitter below par

Twitter’s 5% senior notes due 2030 gave back their premium and sank below par on Friday. The notes fell about ¾ point to close the day at 99½, according to a market source.

There was $12.5 million in reported volume.

The 5% notes, which priced at par, saw a rocky start in the secondary space.

They broke for trade on Feb. 23 with Russia launching its invasion of the Ukraine later that evening.

The notes traded as low as 98 on Feb. 24 but snapped back to close the session on a par-handle, which is where they have traded since.

Fund flows

Dedicated high-yield bond funds were mixed on Thursday, the most recent session that data was available, according to a market source.

High-yield ETFs continued to see outflows; however, actively managed funds saw inflows, according to a market source.

ETFs saw outflows of $231 million while actively managed funds saw inflows of $150 million.

The daily report comes on the heels of the Refinitiv Lipper US Fund Flows report which recorded outflows of $482 million for the week ended March 2.

While the high-yield market has seen five consecutive weeks of outflows, the volume of funds leaving the space has diminished with outflows of less than $1 billion the past two weeks.

Indexes

The KDP High Yield Daily index fell 22 points to close Friday at 62.54 with the yield now 5.16%.

The index was down 5 points on Thursday and 3 points on Wednesday after gaining 7 points on Tuesday and 18 points on Monday.

The index was down 5 points on the week.

The CDX High Yield 30 index returned to a 104-handle. The index fell 68 bps to close Friday at 104.42.

The index fell 28 bps on Thursday, gained 49 bps on Wednesday and sank 67 bps on Tuesday and 29 bps on Monday.

The index posted a cumulative loss of 143 bps on the week.

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