Morning Commentary: Junk firms; Howard Midstream notes trade to premium

By Paul A. Harris

Portland, Ore., June 30 – The high-yield bond market was at least 1/8 of a point better on Friday morning heading into the weekend and the close of the first half of 2023, according to market sources.

A trader saw $2 billion of offers-wanted-in-competition (OWICs) versus $500 million of bids-wanted-in-competition (BWICs), on the morning.

With the S&P 500 stock index up 1.11% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.33%, or 25 cents, at $74.96.

Bonds priced Thursday by Howard Midstream Energy Partners, LLC traded at a premium to their new issue price on Friday morning, a trader said, spotting those bonds at par ¼ bid, par ¾ offered.

The upsized $550 million issue (from $500 million) priced at par.

Among other recent issues the Earthstone Energy Holdings, LLC 9 7/8% senior notes due July 2031 (B3/B+/B+), trading at 98 3/8 bid, 98 7/8 offered on Friday morning, were also above issue price.

The $500 million deal priced at 97.968 to yield 10¼% in a Tuesday drive-by amid document changes favoring investors.

The Viking Cruises Ltd. 9 1/8% senior notes due July 2031 (Caa1/B-) were par ¾ bid, 101¼ offered on Friday morning.

Those bonds were par bid, par ¼ offered on Thursday.

The $720 million issue came at par in a Monday drive-by.

The primary market was quiet on Friday morning and is likely to remain quiet until after Tuesday’s Independence Day holiday, sources say. Although the market will be open on Monday, ahead of the holiday, some participants maneuvered into an extended holiday set to get underway at the Friday close.

Fund flows

Actively managed high-yield funds saw a hefty $700 million of daily cash inflows on Thursday, according to a market source.

However, the high-yield ETFs saw outflows slightly in excess of that number on Thursday – negative $716 million on the day.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined funds sustained $730 million of net outflows in the week to the Wednesday, June 28 close, according to fund-tracker Refinitiv Lipper.

That was the first negative weekly flow in June, according to the market source.

In the first half of 2023, 14 of the 26 weekly flows were negative, the source added.

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