Morning Commentary: Junk slides amid big stock market sell-off; Roblox notes tumble

By Paul A. Harris

Portland, Ore., Dec. 15 – Cash bonds tumbled ¼ point to ½ point as the major U.S. stock indexes fell more than 2% in the early going on Thursday, sources said.

With the S&P 500 stock index down 2.47% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.64%, or 48 cents, at $74.80.

Bonds of Roblox Corp. sustained a disproportionate drop in price after the gaming platform reported subscriber numbers which disappointed the Street, according to a bond trader in New York.

The Roblox 3 7/8% senior notes due May 2030 changed hands on Thursday at 81½, down 2 points, the trader said.

Thursday’s outgoing tide also took along bonds placed a week ago by Chart Industries, Inc., which have been turning in stellar performances in the secondary market, sources said.

The Chart Industries 7½% senior secured notes due January 2030 (Ba3/B+) were 101 bid, 101½ offered, down about ¼ of a point, according to a sellside source.

The notes priced a week ago at 98.661 to yield 7¾% in a $1.46 billion tranche.

The Chart Industries 9½% senior unsecured notes due January 2031 (B3/B) were 102½ bid, 103¼ offered, also off about ¼ of a point, dragged lower by the market, the sellsider said.

The unsecured paper priced at 97.949 to yield 9 7/8% in a $510 million tranche last Thursday.

Just a little later, however, a bond trader spotted both those recent vintages trading substantially lower.

The 7½% secured notes changed hands at par ¾, down ½ point, the trader said.

The trader saw the 9½% unsecured Chart paper trading 101¾ bid, 101 7/8 offered, noting that it traded Wednesday at 103.

Both bonds were actively trading, the source added.

The substantial price appreciations in both those issues over the course of a week – around $3.75 on the unsecured notes and well over $2 on the secured notes – speaks to the strong demand for paper among high-yield bond investors amid 2022's historic issuance drought, the sellside source remarked.

Relief from that drought is unlikely to materialize anytime soon, sources say.

With the active forward calendar empty, and no new deal announcements on Thursday morning, the 2022 primary market likely has run its course, they add.

January will see an uptick in activity but certainly not a huge uptick, a syndicate banker said.

Fund flows

High-yield ETFs saw $118 million of daily cash inflows on Wednesday, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $85 million of outflows on Wednesday, the source said.

As the markets await a report on the cash flows of the various asset classes from fund tracker Refinitiv Lipper, expected later on Thursday, the combined funds are tracking $80 million of net outflows for the week that concluded with Wednesday’s close, according to the market source.

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