Morning Commentary: Trading continues to thin in late-August junk market; ETFs see big outflow

By Paul A. Harris

Portland, Ore., Aug. 26 – Trading in the high-yield bond market continued to thin as a late-August Friday got underway, a bond trader said.

Making contact with market participants proved challenging.

News that high-profile junk bond issuer Chesapeake Energy Corp. upped the size of its tender offer for convertibles due 2037 and 2038 to $750 million from $500 million didn't create as much as a flutter in the company's existing high-yield paper, the trader said.

High-yield ETF share prices were up on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.28%, or 24 cents, at $86.90 per share at mid-morning. The SPDR Barclays High Yield Bond ETF (JNK), at $36.66 per share, was up 0.36%, or 13 cents.

High-yield ETFs saw substantial daily outflows on Thursday, the trader said.

The ETFs sustained $427 million of outflows on the day.

Actively managed high-yield funds saw positive cash flows of $65 million on Thursday, the trader added.

The primary market was shuttered, and is almost certain to remain so until the market reopens following the Labor Day holiday weekend in the United States, scheduled to get underway one week hence.

Recent issues

Trading among recent issues remains muted as well.

The August deals, for the most part, are just sitting there, in part because issuers took advantage of a technical rally in the summer junk bond market by squeezing prices, the trader said.

That rally was sparked by yield-hungry investors with lots of cash to put to work on a thin August calendar.

Among August's deals, the recent Murphy Oil Corp. split-rated issue has been a conspicuous outperformer, the trader said.

In the face of gyrating crude oil prices the Murphy Oil 6 7/8% senior notes due Aug. 15, 2024 (B1/BBB-/BB+) are up around a point on the week at 104 bid, and there are still buyers, the source said.

Initial guidance on that deal came at 8%, the trader recounted.

Murphy Oil priced the upsized $550 million issue (from $500 million) at par on Aug. 12.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.