Morning Commentary: Junk stages modest rebound on low trading volume; energy names rise

By Paul A. Harris

Portland, Ore., June 28 – High-yield bonds staged a modest rebound out of the gates on Tuesday, according to a trader in New York, who marked cash bonds ½ point to ¾ point better, with the index up 5/8 point.

The moves came amid an overall lack of liquidity, the source said.

“Volume is pretty light, and offers are few and far between,” the trader remarked.

High-yield ETF share prices were up at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was 0.83%, or 68 cents, higher at $82.73 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $34.79 per share, was up 0.87%, or 30 cents.

Energy up 2 points

Recent energy issues, battered by market forces including a precipitous post-Brexit slide in the price of crude oil, recovered some ground on Tuesday.

Among recent energy issues the AmeriGas Partners, LP/AmeriGas Finance Corp. 5 5/8% senior notes due May 20, 2024 were up 1½ points to 2 points at 101¼ bid.

The longer-dated AmeriGas 5 7/8% senior notes due May 20, 2026 were up 1½ points at 98½ bid, 99½ offered.

The deal (Ba3//BB) came in two bullet tranches, each sized $675 million, which were priced at par on June 20.

Recently issued Weatherford International Ltd. bonds were up a point on the day, the trader said.

The Weatherford 7¾% senior notes due June 15, 2021 were quoted at 95 bid, 96 offered. The Weatherford 8¼% notes due June 15, 2023 were 92½ bid, 93½ offered.

The Weatherford deal (B2/BB-) came in a pair of $750 million bullet tranches, which priced at par on June 10.

Crude oil prices were up early on Tuesday, with the barrel price of West Texas Intermediate crude oil for August 2016 delivery as high as $47.75. However the price had retreated to $47.25 by mid-morning.

Meanwhile the new issue market remained becalmed by the fallout from last week’s historic Brexit vote.

Amid volatility sparked by the decision, on the part of voters in the United Kingdom, to leave the European Union, investors can be expected to extract premiums from companies attempting to raise money in the new issue market, sources say.

Syndicate officials forecast that the primary market could remain dormant until the conclusion of the extended U.S. Independence Day holiday weekend ahead.

© 2015 Prospect News.
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