Junk bond secondary closes week on firm footing; Centene, DirecTV on the tape

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 23 – The junk bond secondary space stood poised to close the week on firm footing with the Santa Claus rally, which seemed unlikely on Monday, proving to be real.

The high-yield market has gained about ¾ point over the past week with year-to-date returns again brushing up against 5%.

While the overall market was strong, liquidity continued to diminish with no name tracking more than $10 million in reported volume about one hour before the market’s early close.

Large, liquid issues were the drivers of trading activity in the space.

Centene Corp.’s 2.45% senior notes due 2028 (Ba1/BBB-/BB+) were among the most actively traded names on Thursday although the notes were little changed.

DirecTV Holdings LLC and DirecTV Financing Co. Inc.’s 5 7/8% senior secured notes due 2027 (Ba3/BB/BBB-) also remained active although with little movement in price.

The primary market remained shuttered on Thursday.

Centene eyed

Centene’s 2.45% senior notes due 2028 were among the most actively traded issues in the secondary space on Thursday, although the notes remained largely unchanged.

The notes continued to trade in the 99 3/8 to 99 5/8 context. There was about $8 million in reported volume.

The notes have largely traded below par since October with the notes falling into the category of rate-sensitive names.

However, Centene is also being eyed as a potential rising star with the company one rating upgrade away from achieving the status.

The St. Louis-based health care company announced its intention to cut debt and achieve investment-grade ratings in September.

DirecTV active

DirecTV’s 5 7/8% senior secured notes due 2027 remained active on Thursday as they have for much of the week.

The notes continued to trade on a 102-handle and were changing hands in the 102¼ to 102½ context heading into the close.

There was about $7.5 million in reported volume.

While unchanged day-over-day, the notes have gained about 3/8 point over the past week as the market rallied.

Big ETF inflows continue

The high-yield ETFs continued their succession of strong and steady inflows with a $267 million daily inflow on Wednesday, the most recent session for which data was available at press time, according to a market source.

That inflow follows a $629 million inflow on Tuesday, a $355 million inflow on Monday, a $263 million inflow last Friday and a $781 million inflow last Thursday.

Meanwhile the actively managed high-yield funds sustained $20 of outflows on Wednesday.

Indexes

The KDP High Yield Daily index gained 7 points to close Thursday at 65.69 with the yield now 3.98%.

The index was up 9 points on Wednesday and 15 points on Tuesday after falling 11 points on Monday.

The index was up 20 points on the week.

The CDX High Yield 30 index gained 23 basis points to close Thursday at 109.21. The index was up 23 bps on Wednesday and 40 bps on Tuesday after falling 12 bps on Monday.

The index posted cumulative gains of 74 bps on the week.

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