Morning Commentary: High yield 1 point lower amid thin liquidity; Progroup brings €95 million tap

By Paul A. Harris

Portland, Ore., Dec. 8 – High-yield bonds were weak amid thin liquidity heading into the mid-morning, according to a trader based on the East Coast of the United States.

Junk was as much as a point lower on the morning.

Investors are on the sidelines, and a lot of bonds are not being quoted, the source said.

ETFs were lower on the day.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was trading at $81.61 heading into the mid-morning, down 47 cents.

SPDR Barclays High Yield Bond ETF (JNK) was 20 cents lower at $34.64 per share.

An imbalance between weak electricity prices caused by the fall of natural gas prices, and rising costs related to environmental regulations is putting pressure on independent power producers, the trader said.

Bonds of Dynegy Inc. have fallen dramatically, the source said.

The Dynegy Finance I, Inc./Dynegy Finance II, Inc. 7 5/8% senior notes due Nov. 1, 2024 were 83¼ bid, 84½ offered on Tuesday.

Those bonds were 87½ bid on Thursday afternoon and have fallen 6 points-plus in the past three trading sessions, the trader said.

Among recent issues, the Group 1 Automotive, Inc. 5¼% senior notes due Dec. 15, 2023 (Ba2/BB) were at par bid, par 1/8 offered on thin volume.

The $300 million deal, which was upsized from $250 million, priced at par last Thursday.

The primary market

The news flow in the new issue market remained thin, with all of the news coming out of Europe on Tuesday morning.

Germany-based containerboard producer Progroup AG talked a €95 million add-on to its 5 1/8% senior secured notes due May 1, 2022 (expected ratings B1/B+) at 104.75 to 105.

The acquisition financing deal via Deutsche Bank, Commerzbank and HSBC is set to price Tuesday.

Meanwhile Goodyear Tire & Rubber Co. plans to market a €250 million offering of eight-year senior notes (BB) on Wednesday in London.

The debt refinancing deal is also set to price on Wednesday.

Deutsche Bank, BNP Paribas, BofA Merrill Lynch, Credit Agricole, Goldman Sachs, JPMorgan and Wells Fargo are the leads.

The Akron, Ohio-based tire company intends to issue the notes via its European subsidiary, Goodyear Dunlop Tires Europe BV (see related stories in this issue).

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the trader said.

High-yield ETFs saw $202 million of inflows on the day.

Asset managers sustained $105 million of outflows on Thursday.

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