Morning Commentary: Elis reopens European high-yield primary; Carvana notes rebound

By Paul A. Harris

Portland, Ore., May 17 – The high-yield bond market improved ¼ point at Tuesday’s open, with junk taking its header from equities, according to a bond trader in New York.

With the S&P 500 stock index up 0.98% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 12 cents, or 0.16%, at $76.58.

France-based Elis SA reopened the euro-denominated new issue market, launching a €300 million offering of five-year senior bullet notes (expected ratings Ba2/BB+//DBRS: BBBL) to yield 4¼%, tighter than the 4 3/8% to 4½% guidance (initial talk was in the 4 7/8% area).

The deal was heard to be playing to €2.4 billion of orders.

Meanwhile, the dollar-denominated primary market stood idle on Tuesday morning, and the active forward calendar was empty.

The bonds of Carvana Co. improved on Tuesday morning as the troubled online car seller announced that it expects sequential reductions in selling, general and administrative expenses per vehicle sold throughout the year.

The Carvana 10¼% senior notes due May 2030 (Caa2/CCC) changed hands at 88¾, up a point on the morning, according to a sellside source.

Last week they were 83 bid, 84 offered.

Carvana priced $3.275 billion of the 10¼% notes (upsized from $2.275 billion) in late April, with Apollo Global Management reported to have taken down nearly half, or $1.6 billion, of the upsized issue.

Earlier in May, Carvana cut 2,500 staff in its struggle with overcapacity, sources say.

Big Monday outflows

The dedicated high-yield bond funds sustained $1.55 billion of net daily outflows on Monday, according to a market source.

Actively managed high-yield funds saw a whopping $1.13 billion of outflows on the day, the source said, adding that those outflows were broad-based.

High-yield ETFs sustained $420 million of outflows on Monday.

The combined funds are tracking $2.08 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

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