Morning Commentary: Junk market coat-tails rallying equities; funds see Friday outflows

By Paul A. Harris

Portland, Ore., Oct. 17 – The high-yield bond market rose ¼ of a point, or perhaps a little more, as equities staged a Monday morning rally, according to a bond trader in New York.

With the S&P 500 stock index up 2.64% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 1.1%, or 78 cents, at $72.29.

The Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+) were up about ¼ of a point, changing hands at 88 5/8, the trader said.

The Ford green notes came in a $1.75 billion deal that priced at par in mid-August.

The most recent dollar deal to clear the market, the Odeon Finco plc (AMC Entertainment Holdings, Inc.) 12¾% senior secured notes due November 2027 (B3/B), was largely inactive on Monday morning, sources said.

One trader had them at 92½ bid, 93½ offered.

Not long afterward another trader spotted them at 93¾.

The $400 million issue priced on Friday at 92 to yield 15.066%.

Prior to the New York open the Fedrigoni/Fiber Bidco SpA senior secured notes due October 2027 (B2/B/BB-) were trading above their new issue prices, according to a market source in London.

The 11% fixed-rate notes were 97¾ bid, 98¼ offered. The €300 million tranche of 11% fixed-rate notes priced at 97.25 to yield 11¾% on Friday.

The three-month Euribor plus 600 basis points floating-rate notes were 91.25 bid, 92 offered. The €572.66 million floaters priced at 91, also on Friday.

The primary market remained quiet on Monday morning, with one dollar-denominated deal, a Nordic transaction, on the active forward calendar.

Netherlands-based offshore oil and gas services company Bluewater Holding BV was expected to begin marketing a $240 million offering of four-year senior notes on Monday.

Fund flows

The dedicated high-yield bond funds sustained $484 million of net outflows on Friday, according to a market source.

High-yield ETFs saw $394 million of outflows on the day.

Actively managed high-yield funds sustained $90 million of outflows on Friday, the source said.

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