Secondary quiet ahead of Fed; Cleveland-Cliffs, Coinbase bounce off lows; Lumen active

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 14 – The domestic high-yield primary market remained dormant on Tuesday with one deal set to price during Wednesday’s session.

Iris Holdings Inc. is on deck with its $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc. with price talk coming well wide of guidance.

Meanwhile, it was another red day for the secondary space with the cash bond market closing down another ½ point following Monday’s dramatic sell-off.

The market rallied on a downwardly revised rate forecast from the Federal Reserve after the release of the Federal Reserve’s minute notes two weeks ago.

However, those forecasts underwent a dramatic revision following last Friday’s release of the Consumer Price Index report with the market once again pricing in a 75 basis points increase, which some sources expect to be announced on Wednesday.

While the market was again weak, volume was thin as the market awaits the Fed’s Wednesday announcement.

“Nobody’s doing anything,” a source said.

However, the 10-year Treasury yield continued to march to new heights with the yield hitting 3.501% before settling at 3.482%.

Several names that hit all-time lows on Monday were on the rise on Tuesday with opportunistic buyers bargain hunting in the space.

Cleveland-Cliffs Inc.’s 4 5/8% senior notes due 2029 and 4 7/8% senior notes due 2031 (B3//B) were on the rise after both tranches hit their lowest level on Monday since pricing in 2021.

Coinbase Global, Inc.’s senior notes (Ba1/BB+) also pared their losses after leading losses during Monday’s session.

Lumen Technologies’ 4% senior notes due 2027 saw heavy volume during Tuesday’s session with the notes slightly softer following Monday’s sell-off.

Iris on deck

On an otherwise quiet Tuesday in the high-yield primary market Iris Holdings set wide to guidance price talk for a $400 million offering of 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group by Clearlake Capital Group LP.

Official talk has the deal coming with a 10% coupon at an issue price of 83 to 85 to yield in the context of 13½% to 14%.

Pricing is expected on Wednesday.

Although the coupon talk comes on top of initial guidance, price talk comes at a steep discount to original guidance which was in the low 90s, and yield talk comes well wide to initial guidance in the high-11% to low-12% area.

Cleveland-Cliffs bounces

Cleveland-Cliffs’ 4 5/8% senior notes due 2029 and 4 7/8% senior notes due 2031 were bouncing off their lows on Tuesday.

The 4 5/8% notes due 2029 rose 2¼ points. They were changing hands at 90¾ heading into the market close with the yield now 6.342%.

There was $8 million in reported volume.

The 4 7/8% senior notes due 2031 gained 2½ points with the notes returning to a 91-handle heading into the market close.

There was $14 million in reported volume.

The 4 5/8% notes and 4 7/8% notes hit their lowest levels since the tranches priced at par in February 2021.

The 4 5/8% notes sank to an 87-handle and the 4 7/8% notes sank to an 88-handle on Monday.

The notes were trading at 90 and 91 respectively heading into Monday’s session.

Coinbase pares losses

Coinbase’s senior notes were also on the rise after also hitting their lowest level on Monday since pricing.

Coinbase’s 3 3/8% senior notes due 2028 gained 1½ points.

The notes returned to a 66-handle and were changing hands in the 66 to 66½ context heading into the market close for a yield just shy of 11%.

The 3 5/8% senior notes due 2031 rose about 1 point with the notes changing hands in the 59 to 60 context with a yield of about 10½%.

There was $19 million in reported volume.

Coinbase’s junk bonds were paring their losses after leading declines during Monday’s sell-off.

Coinbase was particularly hard hit in Monday’s sell-off as the crypto space melted following crypto lending platform Celsius Network’s announcement it was halting withdrawals.

While Coinbase was paring losses, Bitcoin continued to plummet with the cryptocurrency down to $21,482.70, a decrease of 4.36%, shortly before 6 p.m. ET.

Lumen active

Lumen Technologies’ 4% senior notes due 2027 were “a tad softer” in heavy volume on Tuesday.

The 4% notes shaved off another ¼ point with several large prints in the name at 84½, a source said.

While there were only four trades in the name, there was $20 million in reported volume.

The notes were on an 85-handle on Monday.

There was no topical news to spark the activity in the name with the trades most likely the result of a portfolio repositioning, a source said.

Big outflows on Monday

The dedicated high-yield bond funds sustained a big $1.696 billion amount of daily net outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $985 million of outflows on the day, said the source, adding that those outflows were broad based.

High-yield ETFs sustained $711 million of outflows on Monday.

The combined funds are tracking $2.7 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 18 points to close Tuesday at 54.75 with the yield now 7.56%.

The index sank 143 points on Monday.

The ICE BofAML US High Yield index fell another 54.47 basis points with the year-to-date return now negative-12.94%.

The index plummeted 212 bps on Monday.

The CDX High Yield 30 index rose 1 bp to close Tuesday at 97.18.

The index sank 162 bps on Monday.

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