Morning Commentary: Record-revenue report lifts Uber bonds; funds see solid inflows

By Paul A. Harris

Portland, Ore., Aug. 2 – As geopolitics took center stage in Tuesday's news headlines, the high-yield bond market opened the session unchanged, traders said.

With the S&P 500 stock index down 0.25% as news circulated that Nancy Pelosi, Speaker of the U.S. House of Representatives, arrived for a visit to Taiwan – a visit bitterly opposed by the government of the People's Republic of China – the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.24%, or 19 cents, at $77.72.

In financial news Uber Technologies, Inc. reported $382 million of free cash for the second quarter, the first time it has been cash flow positive in its 13-year history, which sent the company’s share price (NYSE: UBER) rocketing 15% and also lifted its bond prices, according to a sellside source.

The Uber Technologies 7½% senior notes due September 2027 changed hands Tuesday morning at 102¾, up about a point from Monday, the sellsider said.

In its Tuesday earnings report, the San Francisco-based ride-sharing company said that its revenue grew by 105% year over year to $8.1 billion, exceeding analysts' expectations of $7.4 billion.

Meanwhile, as the investment-grade new issue bourse remained active on Tuesday morning, the junk bond primary market held to the sidelines, with investors keen to determine a fair price for risk assets and issuers pondering the ballooning cost of capital in an inflationary rate cycle.

August 2022 will almost certainly live up to the old saw about the quiet “Dog Days” period in the high-yield primary, with issuance expected to remain lean ahead of Labor Day, Sept. 5 – the bond market's traditional summer-fall boundary.

Monday inflows

The dedicated high-yield bond funds saw $680 million of daily net inflows on Monday, according to a market source.

High-yield ETFs saw $515 million of inflows on the day.

Actively managed high-yield funds saw $165 million of inflows on Monday.

The combined funds are tracking a hefty $2.3 billion of net inflows for the week that will conclude at Wednesday's close, the source said.

In the most recent full week reported (to the July 27 close) the combined funds reported $4.83 billion of net inflows, the biggest weekly inflows since June 2020, according to the market source.

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