Morning Commentary: Junk opens unchanged on Thursday; accounts see massive Wednesday inflows

By Paul A. Harris

Portland, Ore., March 3 – The high-yield index opened ¼ point lower on Thursday; however, cash bonds were somewhat better than that, according to a New York based trader who was marking cash unchanged.

Investors appear to be moving back into risk in a big way, according to a debt capital markets banker, who added that later Thursday, when Lipper-AMG puts out its weekly fund flows numbers spanning the Feb. 25 open to last night's close, it’s apt to be a whopper.

The market is looking for $2 billion-plus inflows to the dedicated junk accounts for the week, the banker said, adding that Wednesday’s daily numbers certainly point in that direction.

High-yield ETFs saw $828 million of inflows on the day.

Actively managed funds saw a massive $1.05 billion of inflows on Wednesday.

Other signs point to a junk market that could be in recovery, the banker said.

The yield to worst of the Merrill Lynch US High Yield Master II index was 8.28% on Thursday morning, down from a high of 10.10% on Feb. 11, the source said.

Quiet primary

The new issue market, which has been generally quiet throughout the week, remained so on Thursday morning.

One deal is on the active calendar.

GameStop Corp. is marketing a $400 million offering of five-year senior notes (Ba1) via bookrunner BofA Merrill Lynch.

The deal appears to be coming together in the mid-6% range, a trader said on Thursday.

One factor impeding issuance was the J.P. Morgan Global High Yield & Leveraged Finance Conference, which took place this week in Miami and was scheduled to wrap up on Wednesday.

People are looking for more robust new issue activity in the weeks to come, a syndicate banker said on Thursday.

Meanwhile, high-yield ETFs were slightly lower heading into the New York mid-morning on Thursday. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 9 cents, or 0.11%, at $80.28 per share. SPDR Barclays High Yield Bond ETF (JNK), at $33.53 per share, was down 8 cents, or 0.22%.

The ETFs were engaged in a slight amount of residual buying on Thursday morning, the New York trader said.

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