High-yield rally continues, wipes out May losses; Mohegan jumps; Ziggo lifted; NCR rebounds

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 27 – The new issue market remained quiet as expected ahead of Friday's early close and the extended holiday weekend.

While the primary market has been anemic in May, the week ahead is expected to be an active one with at least one new deal in the works.

Meanwhile, the risk-on rally in the secondary space continued on Friday with the market wiping out three weeks of losses in three days, a source said.

The cash bond market fell almost 3 points in a month of wild swings.

However, those losses were wiped out over the past three sessions with strong inflows following the release of the Federal Reserve’s May minute notes on Wednesday sparking an ETF buying spree.

“It keeps going higher,” a source said.

The cash bond market was up another ½ to ¾ point. While volumes were thin in Friday’s shortened session, ETF buyers continued to lift several struggling credits.

Mohegan Gaming & Entertainment’s 8% senior secured notes due 2026 (Caa1/B-) made large gains in active trading with ETFs bidding up the paper.

VodafoneZiggo’s 4 7/8% senior secured notes due 2030 (B1/B+) were also on the rise in active trading with the issue included in some of the offers-wanted-in-competition lists circulating the market.

NCR Corp.’s 5 1/8% senior notes due 2029 (B3/B) also had large gains after a post-earnings slump.

New deals?

The new issue market remained quiet as expected ahead of Friday's early close and the extended holiday weekend (the Securities Industry and Financial Markets Association recommended a 2 p.m. ET Friday close).

When post-holiday activity resumes on Tuesday, the final day of the month, May is set to end having seen just $2.2 billion of new dollar-denominated issuance in two tranches of junk on the month, by far the most anemic May in the modern history of the market.

Record May issuance of $51.3 billion came just one year ago, in May 2021.

Average issuance for the month of May, going back to 2010, is $28.2 billion.

For purposes of comparing the depth of the present contraction, the previous record low amount of May issuance was $5.7 billion in 2010, as the world was digging its way out of the Great Recession, with hundreds of millions of people around the globe unemployed.

As May gives way to June business the bond market should pick up, sources say.

As the investment-grade market braces for what is expected to be a high-volume post-Memorial Day week of issuance, at least one big junk deal is in the headlights.

Equitrans Midstream Corp. is expected to show up in the week ahead with a $1 billion offering via BofA Securities, Inc., according to information gleaned from market sources.

Mohegan jumps

Mohegan’s 8% senior secured notes due 2026 made large gains in active trading on Friday with ETF buyers bidding up the notes.

The 8% notes rose more than 3 points.

The notes launched the day on an 88-handle and were quickly bid up, a source said.

The notes traded as high as 92¾ during the session and were marked at 91 bid, 92 offered heading into the early close.

There was $17 million in reported volume.

VodafoneZiggo on the rise

VodafoneZiggo’s 4 7/8% senior secured notes due 2030 were also on the rise in active trading.

The notes gained 2 points to close the day 93 7/8, according to a market source.

The yield was 5.88%.

There was $10 million in reported volume.

ETF buying was driving up the notes, a source said.

The notes were included in some of the offers-wanted-in-competition lists that have been circulating the market.

NCR gains

NCR’s 5 1/8% senior notes due 2029 recouped their losses from a late April post-earnings drop.

The 5 1/8% senior notes rose 3 points to close Friday at 96 1/8 with a yield of 5.8%.

There was $5 million in reported volume.

The ATM kiosk provider’s notes have been under pressure since a disappointing earnings report in late April.

The notes traded as low as 89 in mid-May.

More big ETF inflows

The high-yield ETFs saw $768 million of daily cash inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

It was the third consecutive big daily inflow to the junk ETFs which saw inflows of $452 million on Wednesday and $589 million on Tuesday, the source said.

Actively managed high-yield funds, however, saw $310 million of outflows on Thursday.

News of those daily flows trails a Thursday report that the combined funds saw $236 million of net outflows in the week to the Wednesday, May 25 close, according to Refinitiv Lipper.

The junk funds have sustained $36.6 billion of year-to-date outflows, according to the market source.

Indexes

The KDP High Yield Daily index rose 37 points to close Friday at 58.16 with the yield now 6.25%.

The index was up 41 points on Thursday, 53 points on Wednesday, 3 points on Tuesday and 57 points on Monday.

The index posted a cumulative gain of 191 points on the week.

The CDX High Yield 30 index rose 38 basis points to close Friday at 101.76.

The index gained 54 bps on Thursday, 92 bps on Wednesday, 16 bps on Tuesday and 69 bps on Monday.

The index posted a cumulative gain of 269 bps on the week.

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