More red in junkland; Ford active, but flat; Charter on a 97-handle; Carvana retests lows

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 30 – There was more red in the secondary space on Tuesday with the cash bond market dropping another ½ point after a strong open, sources said.

The cash bond market was up ¼ point early in the session with equity futures in the green.

However, selling pressure quickly set in with rate and recession concerns continuing to drag down the market as the Federal Reserve accelerates its balance sheet runoff.

ETF buying, which drove the dovish pivot rally throughout much of August, has given way to ETF selling with ETFs circulating several bids-wanted-in-competition lists on Tuesday, a source said.

While the secondary space continued to go red on Tuesday, volume remained thin with large, liquid issues and recently priced paper dominating the tape.

Ford Motor Co.’s recently priced 6.1% senior green notes due 2032 (Ba2/BB+) remained active although with little movement in price with the notes remaining on a 98-handle.

Charter Communications, Inc. subsidiary CCO Holdings, LLC’s 6 3/8% senior notes due 2029 (B1/BB-) were also active with the notes remaining on a 97-handle.

Carvana Co.’s 10¼% senior notes due 2030 (Caa2/CCC) were retesting their lows with the notes breaking below an 80-handle on Tuesday for the first time since the dovish pivot rally began in late July.

Tellurian

The primary market remained quiet on Tuesday.

While new issue volume is extremely muted, in keeping with late summer season, there is activity in the space.

Tellurian Inc. officially launched a $1 billion notes/warrants project financing deal on Monday.

The offer is comprised of units that include an 11¼% senior secured note due 2027, initial talk 95.5 area, with attached warrants for the company's common stock.

The deal officially kicks off on a conference call with investors set for 11 a.m. ET on Wednesday.

The units are set to price in the post-Labor Day week. However, timing could be accelerated, according to an informed source.

Sole bookrunner B. Riley Securities, Inc. makes its debut at the helm of a public high-yield deal with this offer.

And U.K.-based staffing solutions company NES Fircroft is in the market with a $300 million offering of senior secured sustainability-linked notes (B2/B).

The Nordic deal is coming from the company's Norway-based subsidiary NES Fircroft Bondco AS, and is in the market via managers ABG Sundal Collier and Pareto Securities.

Investor presentations were set to start this week.

Active

Several recent deals were hovering near their all-time lows in active trading on Tuesday.

While unchanged day over day, Ford’s 6.1% senior green notes due 2032 remained on a 98-handle, a level the notes sank to on Monday.

The notes continued to change hands in the 98 to 98½ context throughout Tuesday’s session and stood poised to close the day at 98¼.

There was $16 million on the tape about one hour into the session.

The level marks the lowest for the notes since the $1.75 billion issue priced at par on Aug. 16.

Charter subsidiary CCO Holdings’ 6 3/8% senior notes due 2029 also continued to hover near their all-time low.

The 6 3/8% notes remained on a 97-handle.

They were changing hands in the 97½ to 97 5/8 context throughout Tuesday’s session.

There was $14 million in reported volume.

The notes fell to a 97-handle amid the previous week.

While they attempted to break above 98 last Friday, the notes have traded in a tight range near their all-time lows for the past two sessions.

CCO Holdings priced the $1.5 billion issue at par on Aug. 4.

While the notes drifted around par their first two weeks in the market, they have been on a steady downtrend since mid-August.

Carvana retests low

Carvana’s 10¼% senior notes due 2030 are retesting their all-time lows with the notes breaking below an 80-handle on Tuesday.

The 10¼% notes were down ½ point to trade in the 79 to 79½ context during Tuesday’s session.

The yield was just north of 14¾%.

There was $10 million in reported volume.

The used car e-commerce company’s 10¼% notes sank to a rock-bottom low of 78¼ in mid-July with CCC credits under particular pressure as market players questioned their ability to service and refinance their debt.

However, the notes shot as high as 88 amid the market rally.

The notes have given back all of the gains made since the dovish pivot rally began in late July.

$760 million Monday outflows

The dedicated high-yield bond funds sustained $760 million of daily net outflows on Monday, the most recent session for which data was available, according to a market source.

High-yield ETFs had $445 million of outflows on the day.

Actively managed high-yield funds sustained $315 million of outflows on Monday, the source said.

The combined funds are tracking $1.2 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 was down 29 points to close Tuesday at 55.24 with the yield now 7.10%.

The index fell 32 points on Monday.

The ICE BofAML US High Yield index fell 48 basis points with the year-to-date return now negative 10.618%.

The index sank 58.9 bps on Monday.

The CDX High Yield 30 index was down 56 bps to close Tuesday at 98.94.

The index fell 55 bps on Monday.

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