Morning Commentary: Tame PPI fuels risk appetite; United Rentals plans $1.5 billion notes

By Paul A. Harris

Portland, Ore., Nov. 15 – A tamer-than-expected month-over-month increase in U.S. producer prices, suggesting that inflation may be easing, invigorated investors' appetites for risk and sparked a rally in the U.S. capital markets on Tuesday morning, sources said.

The high-yield bond market was up ½ point to as much as 1 point at mid-morning, according to a bond trader in New York, who added that bonds from high beta credits were active and were higher on the morning.

However, another trader, marking cash bonds up ½ point, reported sensing no urgency among buyers, with the pace of offers-wanted-in-competition (OWICs) slowing down as the morning progressed.

With the S&P 500 stock index up 1.26% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price up 0.61%, or 45 cents, at $74.35.

At that time the new bonds priced Monday by Calgary, Alta.-based electricity generator TransAlta Corp. were trading at a handsome premium to their issue price, the New York trader said, marking the TransAlta 7¾% green senior notes due November 2029 (Ba1/BB+) at 102½ bid, 102¾ offered.

The notes priced at par in a $400 million Monday drive-by.

Elsewhere, the recently minted Ball Corp. 6 7/8% senior notes due March 2028 (Ba1/BB+) were 102¼ bid, 102½ offered, up almost a point.

The $750 million issue priced at par to yield 6.879% last Wednesday.

The Neptune BidCo US Inc./Nielsen Holdings plc 9.29% senior secured notes due April 15, 2029 (B2/B/BB) were up ½ point at 95 3/8 in active trading.

The $1.96 billion issue, backing the buyout of Nielsen, priced at 92.294 to yield 11% a week ago.

In the primary market, United Rentals (North America), Inc. rolled out a $1.5 billion offering of seven-year first-lien senior secured notes (Baa3/BBB-) which it plans to price on Wednesday.

The notes are in the market with early guidance in the mid-6% area, according to a sellside source, who added that as much as one third of the offer is spoken for in reverse inquiry.

And Tokyo-based Rakuten Group, Inc. disclosed plans to price a $500 million offering of two-year senior notes (BB+) via sole physical bookrunner Morgan Stanley.

The deal is set to price with the participation of the U.S. high-yield desk early in the week ahead.

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