Morning Commentary: Charter dips on ‘blocked-channel’ news; cash inflows continue

By Paul A. Harris

Portland, Ore., Sept. 1 – The high-yield bond market opened 1/8 of a point higher amid low and dwindling late-summer liquidity on Friday morning, sources said.

At mid-morning, with market participants getting set for the extended Labor Day holiday weekend ahead (with some, in fact, already launched upon the holiday), junk bond trading had come to a standstill, according to a bond trader at work in New York.

With the S&P 500 stock index up 0.25%, at that point, the Shares iBoxx $ High Yield Corporate Bd (HYG) share price was flat, down 0.01%, or a penny, at $74.92.

Bonds of Charter Communications, Inc. were marked lower following news that Disney blocked Charter Spectrum’s customers from channels including ESPN, ABC and FX over carriage disputes as Disney presses cable operators for greater fees.

The trader marked the CCO Holdings, LLC/CCO Holdings Capital Corp. 7 3/8% senior notes due 2031 at 99 bid, half a point lower on the morning, but specified that there was no indication that the paper had traded, apart from possible portfolio trades.

The CCO Holdings 7 3/8% notes due 2031 were 99½ bid, par offered on Wednesday, the trader said.

The new issue market remained idle on Friday morning, as expected, as players eye the post-Labor Day week and a potentially busy month of September ahead.

The investment banks look for as much as $2 billion to $3 billion of issuance during the abbreviated post-Labor Day week, and for September issuance in the context of $20 billion, according to a high-yield syndicate official, who specified that such volume hinges on market conditions, which have been supportive through the late summer, remaining so in the early fall.

Among potential September/fourth-quarter issuer names are companies including Syneos Health Inc., NCR Corp., Uber Technologies, Inc., Worldpay, Bausch + Lomb Corp. and Caesars Entertainment Inc., sources say.

Fund flows

The dedicated high-yield bond funds saw $172 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs saw $102 million of inflows on the day. It was the fifth consecutive strong positive flow for the ETFs, all five greater than $100 million. The biggest of the series was the $502 million inflow on Friday, Aug. 25.

Actively managed high-yield funds saw $70 million of inflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds saw $1.214 billion of net inflows in the week to the Wednesday, Aug. 29 close, according to fund-tracker Refinitiv Lipper.

The most recent figures left the year-to-date cash flows of the dedicated junk funds at negative $11.7 billion, according to the market source.

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