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Morning Commentary: Price-cut news sends Tesla bonds lower; market liquidity thin
By Paul A. Harris
Portland, Ore., Jan. 2 – High-yield bond trading got under way in the new year amid thin liquidity on Wednesday, sources said.
Against a backdrop of weakness in stock and energy prices, junk was perhaps 1/8 point lower, a New York-based trader said.
High-yield ETFs were active sellers on the morning, the trader added.
The ETFs were out with lists totaling $420 million of bids-wanted-in-competition (BWIC) versus just $100 million of offers-wanted-in-competition (OWIC), the source said.
High-yield ETF share prices were lower at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.21%, or 17 cents, at $80.93 per share.
Tesla trades down
Bonds of Tesla, Inc. were in the spotlight, trading down on news that the electric car maker is cutting prices on all of its models by $2,000 to help offset a reduction in federal tax credits for Tesla drivers.
The Tesla 5.3% senior notes due August 2025 traded at 85 3/8, down 2 1/8 points, the trader said.
The primary market remained dormant on Wednesday morning, as it was throughout December, the first month to see zero issuance in the junk bond market in well over a decade.
The most recent deal to clear the market came from Mercer International Inc., which priced $350 million of 7 3/8% senior notes due January 2025 on Nov. 29.
A small amount of those bonds traded on Wednesday, according to a trader, who had them at par bid, par ½ offered.
The most recent big deal to clear the market was not faring nearly as well, the source said.
The RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc. 9¾% senior notes due Dec. 1, 2026 priced at par on Nov. 14 in a $1.425 billion issue.
A small amount of those bonds traded Wednesday at 95, a trader said.
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