Morning Commentary: High yield opens week sharply lower as 10-year Treasury crosses 3¼%

By Paul A. Harris

Portland, Ore., June 13 – High-yield bonds dropped 1 point to 2 points on Monday morning as investors throughout the capital markets demonstrated an aversion to risk assets, sources said.

The yield of the 10-year Treasury rocketed past the 3¼% mark and kept climbing to 3.295% at mid-morning – its highest in over a decade, a trader said – as investors continue to mull Friday's menacing Consumer Price Index print (an 8.6% year-over-year rise), its highest in 40 years.

With the S&P 500 stock index down 2.36% at midmorning, trading in bear territory, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down a whopping 2.14%, or $1.62, at $74.01.

Most recent issues were sharply lower on the morning.

The new Callon Petroleum Co. 7½% senior notes due June 2030 (B3/B/B+) changed hands on Monday morning at 97¾, a sellside source said, adding that they traded at 98½ on Friday.

The $600 million issue priced at par last Thursday.

The Univision Communications Inc. 7 3/8% senior notes due June 2030 (B1/B+) were down a point on the morning at 98, versus 99 on Friday.

The $500 million issue priced at 99.255 to yield 7½% on Thursday.

One recent deal from the oil and gas sector still clung to new issue price ranges on Monday morning.

The EQM Midstream Partners, LP (Equitrans Midstream Corp.) 7½% senior notes due June 2027 (five-year non-call two-year notes) were 99 bid, par offered on Monday morning.

The EQM Midstream Partners 7½% senior notes due June 2030 (a bullet) were 99½ bid, par ½ offered.

The notes came in $500 million tranches (Ba3/BB-/BB), which were priced at par on May 31.

Away from recent issues, the bonds of cryptocurrency trading platform Coinbase Global, Inc. sustained outsized drops on Monday.

The Coinbase Global 3 5/8% senior notes due October 2031 were down 4 points at 59¼ bid, the sellsider said.

The shorter duration Coinbase Global 3 3/8% senior notes due October 2028 changed hands at 66 on Monday, whereas it traded at 73¾ a week ago, the source added.

Crypto lender Celsius Network may have intensified the already significant volatility in the cryptocurrency universe when it paused withdrawals, swaps and transfers between accounts due to “extreme market conditions,” the sellsider said.

Amid the tumult the new issue market remained quiet on Monday.

The active forward calendar features just one deal.

Iris Holdings Inc. is expected to wrap up a roadshow early this week for its $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc. by Clearlake Capital Group LP.

Initial guidance had the notes coming with a 10% coupon at an issue price in the low 90s with an all-in yield in the high 11% area to the low 12% area. Pricing is expected on Tuesday.

The deal was heard to be hitting headwinds late last week, the sellside source said.

The Intertape Polymer offer is the first triple-hooks deal (Caa1 or lower on both sides of the split) to hit the high-yield new issue market since Carvana Co. priced $3.275 billion of 10¼% senior notes due May 2030 (Caa2/CCC) on April 27.

Those bonds were 81 bid, 82 offered on Monday morning after going out at 83 5/8 on Friday, the sellsider said.

ETFs see outflows

High-yield ETFs sustained big daily outflows of $758 million on Friday, according to a market source.

Actively managed high-yield funds were positive on the day, posting $176 million of inflows on Friday, the source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.