Morning Commentary: Junk slips ¼ point as stock prices plummet; funds see big outflows

By Paul A. Harris

Portland, Ore., Jan. 25 – With U.S. stock markets off sharply at mid-morning, high-yield bonds were down ¼ point, according to a bond trader in New York.

With the Nasdaq down 2½%, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.42%, or 36 cents, at $84.99.

Bonds priced Monday by Oxford Finance LLC continued to trade at a handsome premium to their new issue price.

The Oxford Finance Co-Issuer II Inc. 6 3/8% senior notes due February 2027 (Ba3/B/BB-) were wrapped around 102 on Tuesday morning, the trader said.

The notes went out at 102 bid, 102½ offered on Monday night.

The sole deal to clear the market on Monday, the $400 million issue priced at par, at the tight end of talk, on accelerated timing, and was heard to have been playing to a book that was two-times oversubscribed.

Among other recent issues, the VistaJet 6 3/8% senior notes due February 2030 (Caa1/B-/BB-) were 99¼ bid, par offered, down 1/8 of a point on Tuesday morning, the trader said.

The heavily oversubscribed $1 billion deal priced last Thursday at par, inside of price talk, in the biggest session in the new issue market thus far in 2022: $3.42 billion priced in six tranches last Thursday.

In another megadeal that priced during the same session, the CHS/Community Health Systems, Inc. 5¼% senior secured notes due May 2030 (B2/B/BB-) were 99 1/8 bid, par 1/8 offered on Tuesday morning, according to the trader.

Those notes, which came at par in a $1.535 billion issue, have traded heavily since they broke for trading, market sources say.

Amid the turbulence in equities, the high-yield syndicate desks were mostly watching from the sidelines on Tuesday morning.

The only news in the dollar-denominated new issue market came from Acuris Finance US, Inc. and Acuris Finance Sarl, which do business as ION Analytics.

The issuers intend to place $850 million equivalent of eight-year senior secured notes (expected ratings B2/B).

The deal is coming in tranches of dollar-denominated notes with initial guidance in the low-to-mid 6% area and euro-denominated notes with initial guidance in the mid-to-high 4% area.

The offering was set to kick off on a Tuesday conference call with investors.

Big Monday outflows

The dedicated high-yield bond funds sustained $1.452 billion of daily net outflows on Monday, according to a market source.

High-yield ETFs saw $997 million of outflows on the day.

Actively managed high-yield funds sustained $455 million of outflows on Monday, the source said.

The combined funds are tracking $775 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

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