Morning Commentary: Freeport-McMoRan, Albertsons slip; junk ETFs are Monday sellers

By Paul A. Harris

Portland, Ore., Aug. 5 – Along with equities, corporate bonds took a sound beating on Monday morning, sources said.

In Europe, high-grade bonds were 4 basis points to 7 bps wider on the day, while junk bonds were down a point across the board on thin volume, a market source said.

In the United States the CDX HY32 index of high-yield credit default swaps swooped by 0.96 bp, according to a hedge fund manager, who had the index at 105.74 bps bid, 105.81 bps offered.

The CDX IG32 index of investment-grade credit default swaps was 4.16 bps wider on the morning at 60.71 bps bid, 61.11 bps offered, the manager said.

Traders were working through an exceptional amount of bids-wanted-in-competition (BWICs) on Monday, according to New York-based high-yield bond trader.

Among recent issues, bonds placed last week by Freeport-McMoRan Inc. continued down the rocky road they began plying shortly after hitting the secondary market, a trader said.

The shorter maturity 5% senior notes due September 2027 were down 1 3/8 points on the day at 98 1/8 bid.

The long bond, the 5¼% due September 2029, was down 1½ points on Monday at 97 bid.

Both tranches of the Freeport-McMoRan senior notes (Ba1/BB/BB+) were sized at $600 million and were priced at par on Aug. 1.

The Albertsons (Albertsons Cos., Inc., Safeway Inc., New Albertsons LP and Albertson’s LLC) 5 7/8% senior guaranteed notes due February 2028 (B3/BB-), 8.5-year paper, were 99 7/8 bid on Monday, down 0.5 point.

The upsized $750 million issue (from $500 million) priced at par on Aug. 1.

Oil prices also sustained a solid drop on Monday morning.

The barrel price of West Texas Intermediate crude for September 2019 delivery was down 94 cents, or 1.69%, at $54.72.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the index, were 58 bid, 59 offered on Monday morning, the hedge fund manager said. They were 61 bid, 62 offered on Friday.

Quiet primary market

The new issue market remained quiet as the week got underway.

Two dollar-denominated deals are on the active forward calendar.

US Farathane, LLC was scheduled to start a roadshow on Monday for a $600 million offering of five-year senior secured notes.

BofA Securities Inc. has the books for the automotive plastics manufacturer's debt refinancing deal.

Meanwhile Sirius Minerals plc/York Potash Intermediate Holdings plc continues its effort to place a $500 million offering of eight-year senior secured notes (B-/B).

Guidance in the 13½% area was heard last week, well wide of the 10% to 12% initial talk. However, some conversations on the U.K.-based fertilizer company's deal had taken place as high as 15%, according to market source.

Apart from those names, further new issue flow hinges on a return of stability in the capital markets, syndicate bankers advise.

Big ETF outflows Friday

High-yield ETFs sustained $961 million of outflows on Friday, as the threat of trade war took hold, a market source said.

However actively managed funds saw $15 million of inflows on Friday.

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