Morning Commentary: Junk trades modestly higher as buyers return; William Hill on deck

By Paul A. Harris

Portland, Ore., May 20 – Junk opened flat to slightly better on Friday following Thursday losses that were mostly driven by extensive selling on the part of high-yield ETFs, sources said.

Cash bonds were up 1/8 point heading into the Friday mid-morning, a New York-based trader said.

The ETFs saw a whopping $850 million of daily outflows on Thursday, according to a trader in Boston, who added that there was a steady parade of bids-wanted-in-competition (BWIC) lists right up until noon ET on Thursday.

However, ETFs were improved on Friday, with one trader reporting seeing offers-wanted-in-competition (OWIC) lists. Three ETFs were actively buying on Friday morning, the trader added.

ETF share prices were slightly higher heading into the mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 7 cents, or 0.08%, at $82.92 per share. SPDR Barclays High Yield Bond ETF (JNK), at $34.88 per share, was up a penny, or 0.01%.

In the face of the big daily cash outflows sustained by the ETFs on Thursday, actively managed high-yield bond funds actually saw a solid $125 million of inflows on the day, a trader said.

Thursday issues trade up

Prices of bonds sold in the Thursday primary market were higher Friday morning, sources said.

The new Tempur Sealy International, Inc. 5½% senior notes due June 15, 2026 (B1/BB) were par ½ bid, 101 offered on Friday morning.

The $600 million issue, upsized from $500 million, priced at par on Thursday.

The split-rated Universal Health Services, Inc. 4¾% add-on secured notes due Aug. 1, 2022 (Ba1/BBB-) were 102¼ bid, 102¾ offered on Friday morning. The $400 million issue priced at 101.5.

The new Universal Health 5% senior secured notes due June 1, 2026 (Ba1/BBB-) were par 3/8 bid, par 7/8 offered. The $400 million issue priced at par.

William Hill on deck

The dollar-denominated primary market was generally quiet heading into the mid-morning.

There are at least four deals on the active forward calendar; however, it is unlikely that any of them will be priced ahead of the weekend, traders said.

In the European market, William Hill plc launched a £350 million offering of senior notes due Sept. 7, 2023 (expected ratings Ba1/BB+) with a yield of 4 7/8%.

Terms should be available shortly.

Active bookrunner Royal Bank of Scotland will bill and deliver. Lloyds and Santander are also active bookrunners. Barclays and Mediobanca are passive bookrunners.

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