Morning Commentary: Market skids amid low, late-year liquidity; FICO brings $500 million

By Paul A. Harris

Portland, Ore., Dec. 14 – With just over a fortnight remaining in 2021, liquidity has been thinning, and high-yield bonds have steadily been drifting slightly-but-perceptibly lower, according to a trader, who marked junk down ¼ point on Tuesday morning.

With the S&P 500 index down 0.8% and crude oil prices off 1% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.2%, or 17 cents, at $86.46.

Bonds priced Monday by Iron Mountain Information Management Services, Inc., the 5% senior notes due July 2032 (Ba3/BB-), were straddling new issue price, a trader said.

Slightly later another trader had them par bid, par ½ offered.

The upsized $750 million issue (from $500 million) priced at par.

Among recent issues, the Southwestern Energy Co. 4¾% senior notes due February 2032 (Ba3/BB) were down 3/8 of a point at 102 3/8 bid.

The $1.15 billion issue priced last Wednesday at par.

The prices of bonds from credits whose fates rest with recoveries upon a hoped-for abatement of the coronavirus pandemic – the so-called “reopening trades” – were generally down ¼ point to ½ point on Tuesday morning, the trader said.

Names in question included American Airlines, Inc., Caesars Entertainment Inc. and Royal Caribbean Cruises Ltd., the trader said.

In a generally quiet new issue market, FICO plans to price a $500 million add-on to the Fair Isaac Corp. 4% senior notes due June 15, 2028 (assumed ratings Ba2/BB+) in a Tuesday drive-by.

Initial price talk has deal coming at a dollar price in the 99 area.

The extremely thin active new issue calendar includes Ancestry.com's $250 million add-on to the Arches Buyer Inc. 4¼% first-lien notes due June 1, 2028 (B1/B).

That deal, talked at 98.51 – a 2-point discount to the existing bonds based on levels at which the originals were trading before the tap was announced, traders say – is also set to price on Tuesday.

Monday fund flows

The dedicated high-yield bond funds saw $132 million of net daily inflows on Monday, according to a market source.

High-yield ETFs saw $137 million of inflows on the day.

Actively managed high-yield funds were slightly negative on Monday, sustaining $5 million of outflows on the day, the source said.

The combined funds are tracking $550 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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