Morning Commentary: Junk market shrugs off non-farm payrolls; ETFs see Thursday inflows

By Paul A. Harris

Portland, Ore., July 6 – A closely watched Friday report on non-farm payrolls from the Bureau of Labor Statistics failed to move the needle in junk bonds and stocks on Friday morning, traders said.

Junk was flat to up an eighth of a point against a backdrop of flat to slightly better equity prices, a trader said.

The U.S. economy added 213,000 jobs in June, the report stated, besting expectations of 195,000.

Unemployment notched slightly higher to 4% from 3.8%.

High-yield ETFs were up on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.1%, or 8 cents, at $85.19 per share.

High-yield ETFs saw a solid $216 million of cash inflows on Thursday, a trader said. However high-yield asset managers sustained $90 million of outflows on the day.

The news on Thursday's daily flows trails a week report from AMG Data Services Inc. stating that the dedicated high-yield bond funds saw $1.73 billion of net outflows in the week ending July 4.

The junk funds have seen negative weekly flows in five of the past six weeks, with year-to-date flows of negative $25.5 billion, the trader said.

Among recent issues CHS/Community Health Systems’ 8 5/8% senior secured notes due Jan. 15, 2024 (B3/B-) were unchanged at par bid, par ½ offered.

The $1,032,607,000 issue priced at 99.457 to yield 8¾% on June 28.

Meanwhile the Stars Group Holdings BV 7% senior notes due July 2026 (Caa1/B-/B-) were also unchanged at 101 bid, 101½ offered, the trader said.

The $1 billion issue priced at par, also on June 28.

Both Stars and CHS played to substantial demand, with oversubscribed order books, sources said.

Both were also upsized.

Primary becalmed

In the wake of Wednesday's Independence Day holiday celebration, the new issue market remained dormant on Friday, as numerous market participants added vacation time to the mid-week holiday resulting in a full week off from work.

There was not a great deal of conviction that the new issue bourse would meaningfully regenerate, at least in the early part of the July 9 week.

In the dollar-denominated market one deal is expected to price early in the week ahead, a trader said.

Tribal gaming concern Enterprise Development Authority is expected to price its $440 million offering of five-year senior secured notes (S&P: expected B-), a capital expenditures deal via Wells Fargo Securities LLC.

No change has been heard in the price talk: 10½% coupon at 98 to yield 11%, the trader said.

The Enterprise Development Authority roadshow wrapped up in the middle part of the June 25 week, and it has been radio silence on the deal since that time.

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