Primary prices $2.4 billion; U.S. Steel ‘stuck’ at par; PennyMac, Northern Oil weaken

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Feb. 9 – Amid a steady Tuesday news flow in the primary market four issuers priced a combined total of five dollar-denominated high-yield tranches to raise $2.4 billion.

Tight executions continued to be the rule, with four of Tuesday tranches coming at the tight ends of talk, while the fifth priced inside of talk.

Meanwhile the active forward calendar saw a modest build up.

In the wake of Tuesday's action there remained $2.4 billion of dollar-denominated business slated to clear the market ahead of Friday's close.

Meanwhile, the secondary space was largely unchanged on Tuesday. However, the overall market remained well bid, sources said.

“Things are going in one direction,” a source said.

New paper continued to dominate the tape with activity outside of recent issues slow.

However, while new paper was actively traded, several recent issues saw little movement in terms of price.

United States Steel Corp.’s 6 7/8% senior notes due 2029 (Caa2/B-/CCC+) were “stuck” at par in active trading, a source said.

While still trading with a premium, Northern Oil and Gas, Inc.’s 8 1/8% senior notes due 2028 (Caa1/B/B) and PennyMac Financial Services Inc.’s 4¼% senior notes due 2029 (B1/BB-) were coming in from the heights reached after breaking for trade on Monday.

Stuck

U.S. Steel’s 6 7/8% senior notes due 2029 were wrapped around par in active trading on Tuesday.

They remained at par bid, par ¼ offered throughout the session.

“They’re stuck,” a source said.

The notes were priced to perfection and had nowhere to go in the aftermarket.

There were also sellers of the notes right out of the gate, another source said.

U.S. Steel priced an upsized $750 million, from $500 million, issue of the 6 7/8% notes at par on Monday.

Initial guidance had the notes coming to yield 7% to 7¼%.

Coming in

While Northern Oil’s 8 1/8% senior notes due 2028 and PennyMac’s 4¼% senior notes due 2029 were strong out of the gate, both issues gave up some of their gains on Tuesday.

Northern Oil’s 8 1/8% senior notes were marked at par ¾ bid, 101 offered heading into the market close on Tuesday.

The notes were strong after breaking for trade on Monday and were marked at 101½ bid, 102 offered.

In a heavily oversubscribed offering, Northern Oil priced an upsized $550 million, from $500 million, issue of the 8 1/8% notes at par on Monday.

The yield priced tighter than the 8¼% to 8½% yield talk. Early guidance was in the high 8% to 9% area.

The deal was heard to be as much as five-times oversubscribed.

PennyMac’s 4¼% senior notes due 2029 were marked at par ¼ bid, par 5/8 offered.

They traded up to par ¾ bid, 101½ offered after breaking for trade on Monday.

The financial services provider priced an upsized $650 million, from $500 million, issue of the 4¼% notes at par on Monday.

The yield printed at the tight end of the 4¼% to 4½% yield talk.

$46 million Monday inflows

The dedicated high-yield bond funds saw $46 million of net daily inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed funds saw $65 million of inflows on the day.

However high-yield ETFs were negative on Monday, sustaining $19 million of outflows on the day, the source said.

The combined funds are tracking $580 million of net inflows for the week that will concluded with Wednesday's close, according to the market source.

Indexes mixed

Indexes were mixed on Tuesday after a strong start to the week.

The KDP High Yield Daily index gained 5 points to close Tuesday at 69.8 with the yield now 3.78%.

The index was up 7 points on Monday.

The ICE BofAML US High Yield index rose 6.9 bps with the year-to-date return now 1.291%.

The index was up 13.3 bps on Monday.

The CDX High Yield 30 index fell 19 points to close Tuesday at 109.41.

The index was up 11 points on Monday.

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