Morning Commentary: Junk opens heavier as consumer confidence slides; CURO on deck

By Paul A. Harris

Portland, Ore., July 16 – Heaviness took hold in high-yield bonds on Friday morning, in line with weaker equities, as the market measured a monthly report from the University of Michigan indicating a drop in consumer confidence, a bond trader said.

The closely followed preliminary sentiment index dropped to 80.8 in July, from 85.5 in June. The median projection had been 86.5, among economists surveyed by Bloomberg.

Recent issues appeared to be generally hanging in.

The ADT Inc. 4 1/8% first-priority senior secured notes due August 2029 (Ba3/BB-) were par ¼ bid, par 3/8 offered at midmorning, the trader said, adding that they changed hands at par 3/8 on Thursday evening.

The $1 billion issue priced at par on Thursday, in the middle of talk.

MoneyGram International, Inc.'s 5 3/8% senior secured notes due August 2026 (B2/B+) were 101 5/8 bid, 102 1/8 offered, after having been seen earlier at 102 bid, the trader said.

The $415 million issue priced at par on Wednesday, 12.5 basis point inside talk.

However, the Laredo Petroleum, Inc. 7¾% senior notes due July 2029 (B3/B) had sagged to 97 bid, 97½ offered by midmorning, after opening at 97¾% bid.

The $400 million issue priced at par on Tuesday.

Crude oil prices slid from the time the ink dried on Laredo's newly minted bonds.

A midweek agreement between Saudi Arabia and the United Arab Emirates, to supply more crude to a tight market, sent the barrel price of West Texas Intermediate crude oil (WTI) for August delivery tumbling more than $4.50 from earlier in the week.

The WTI price was $71.27 at Friday midmorning, down 21 cents, or 0.32% on the day, having dropped around 4% on the week.

The new issue market was generally quiet, heading into the weekend, with a sole dollar-denominated issue poised to clear ahead of Friday's close.

The market expects terms shortly on CURO Group Holdings Corp.'s $700 million offering of seven-year senior secured notes (B3/B-), talked Thursday to yield 7½% to 7¾%, inside of 7¾% to 8% initial guidance.

The deal was heard to be playing to $2 billion of demand, having ridden into the market on $1.1 billion of reverse inquiry, a trader said.

Thursday fund flows

The dedicated high-yield bond funds sustained light net daily outflows of $60 million on Thursday, according to a market source.

High-yield ETFs disgorged $150 million of cash on the day.

However actively managed high-yield funds were positive on Thursday, posting $90 million of inflows, the source said.

News of Thursday's daily flows trails a Thursday report that the combined funds sustained $1.4 billion of net outflows in the week to Wednesday's close, according to the Refinitiv Lipper Fund Flow Report Newsline.

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