Morning Commentary: Junk inches higher as equities rally; select energy names improve

By Paul A. Harris

Portland, Ore., Dec. 3 – Junk was 1/8 point to ¼ point higher in low to moderate volume as high-yield investors applauded a big Monday morning stock market rally mostly from the sidelines, according to a trader in New York.

With the Nasdaq up 1.3% at mid-morning, trailing news that president Donald Trump and Chinese president Xi Jinping called a truce in an ongoing trade dispute last week at the G20 Summit in Buenos Aires, high-yield ETFs were higher.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.42%, or 35 cents, at $83.58 per share.

In the beaten up energy sector, news that oil prices were seeing their biggest rally in more than five months, sparked in part by a decision from Saudi Arabia and Russia to extend their cooperation pact, select energy names with exposure to the oil patch traded higher on Monday morning.

With the barrel price of West Texas Intermediate crude for January 2019 delivery up 3.12%, or $1.59, at $52.52 at mid-morning, the Whiting Petroleum Corp. 6 5/8% senior notes due January 2026 were 98¼ bid, up 2 3/8 points.

The Oasis Petroleum Inc. 6¼% senior notes due May 2026 were up to 2½ points at 95 bid.

The recently minted Vantage Drilling International 9¼% senior secured first-lien notes due November 2023 (Caa1/B) were straddling par at 99½ bid, par ½ offered, unchanged on the day.

The $350 million issue came at par on Nov. 14.

Away from energy, headline news that Nexstar Media Group Inc. will acquire Tribune Media Co. in a cash transaction that is valued at $6.4 billion, including the assumption of Tribune’s outstanding debt, did not immediately kindle big markets in the existing bonds, the trader said.

A quiet primary

Meanwhile the active new issue calendar remained empty on Monday morning as the primary market failed to generate fresh news.

Issues new to the market since the onset of autumn have tended to lag new issue prices as the old year wanes – some significantly, sources say.

The Refinitiv 8¼% notes due November 2026 (Caa2/B-/B+) were up with the market on Monday, at 96¾ bid. Those bonds, which priced at par in a $1,575,000,000 tranche on Sept. 18, were 1¼ points better in the new week, the trader said, adding that they were 95½ bid, 96 offered on Friday.

In an informal canvassing of syndicate bankers and investors, the consensus opinion is that the dollar-denominated high-yield new issue market should see activity in the present pre-holiday issuance window which is expected to remain open at least until the Dec. 14 close.

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