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Morning Commentary: Junk firms along with stocks ahead of Fed; primary market quiet
By Paul A. Harris
Portland, Ore., March 16 – The high-yield bond market firmed on Wednesday ahead of an expected announcement from the Federal Reserve Bank's Federal Open Market Committee that its benchmark Fed Funds rate will increase for the first time in nearly half a decade, according to a bond trader in New York.
With the S&P 500 stock index up 1.6% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up a handsome 1.16%, or 93 cents, at $81.50.
The Clear Channel Worldwide Holdings Inc. 7¾% senior notes due April 2028 were up about 7/8 of a point at par ¾ bid, the trader said.
The Twitter, Inc. 5% senior notes due March 2030 (Ba2/BB+) were 99 bid, 99¼ offered, trading in odd lots on Wednesday.
The biggest deal to price since mid-February ($1 billion priced on Feb. 23, the day before Russia invaded the Ukraine), the Twitter 5% notes were 97 bid on Tuesday.
Bonds in the energy sector tended to be down 1/8 point to ¼ point on the morning, the trader said, noting that the barrel price of West Texas Intermediate crude oil was $96 at mid-morning, easing 32 cents on the day, but off nearly $28 from its $123.70 close on March 8.
In the primary market SPX Flow Inc. (Redwood Star Merger Sub. Inc.) remained the only name presently to be found on the active forward calendar.
There has been no news on the deal, a $570 million offering of eight-year senior notes (Caa2/CCC) with initial guidance in the high 8% to 9% area, since last week, sources say.
A roadshow is scheduled to wrap up on Thursday.
There are other deals to be done, sources say, pending market conditions.
Mixed fund flows
The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, according to a market source.
High-yield ETFs saw $105 million of inflows on the day.
However, actively managed high-yield funds sustained $250 million of outflows on Tuesday, the source said.
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