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Morning Commentary: Junk eases slightly ahead of the Fed; ETFs see sizable outflows
By Paul A. Harris
Portland, Ore., Dec. 15 – High-yield bonds eased slightly ahead of the final policy announcement from the Federal Reserve Bank for 2021, expected later on Wednesday, a portfolio manager said.
There is very little activity in the market, the investor added.
With the Dow Jones industrial average down 0.3% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat, down 3 cents, or 0.03%, at $86.45.
Among recent deals, Iron Mountain Information Management Services, Inc.’s 5% senior notes due July 2032 (Ba3/BB-) were par 3/8 bid, par ¾ offered on Wednesday morning, the manager said.
The upsized $750 million issue (from $500 million) priced on Monday at par, playing to a book that was well-oversubscribed by investors, many of them in with limit orders specifying 5% and no lower, sources said.
The primary market was quiet on Wednesday morning, with one deal remaining on the active forward calendar.
Skillz Inc. talked its $300 million offering of five-year first-lien secured notes (expected B3/confirmed B-) to price with a 10¼% coupon with an original issue discount of 97 to yield in the 11% area, in line with initial guidance.
Pricing is set for Wednesday.
The deal, with which the San Francisco-based game competition platform is making its debut in the high-yield bond market, also underwent covenant changes.
It is possible that it will be the final deal of 2021, with some of the bigger dealers signaling they are finished for the year, market source said.
ETFs see outflows
The high-yield ETFs sustained sizable outflows of $516 million on Tuesday, according to a market source.
Actively managed high-yield funds, meanwhile, saw positive flows on the day, posting $24 million of inflows on Tuesday, the source said.
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