Morning Commentary: Risk appetite roars back; investors lift junk by as much as a point

By Paul A. Harris

Portland, Ore., May 26 – Investors’ appetite for risk revived on Thursday with junk bond prices improving ½ point to 1 point, a New York-based bond trader said.

The high-yield ETFs were the main driver, the trader noted.

With the S&P 500 stock index up 1.5% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was better by 0.73%, or 57 cents, at $78.09.

Prior to the opening of markets in the United States, the euro-denominated junk market was ¼ point better, with buyers outnumbering sellers five-to-one, a market source said.

Hedge funds were taking on risk, the source added.

In the U.S. market the Carnival Corp. 10½% senior notes due June 2030 (B2/B), the most recent dollar-denominated deal to clear the market, were up handsomely at 101½ bid, 102 offered in fairly active trading, the New York trader said.

Those bonds were 99¾ bid, par ¼ offered on Wednesday.

The oversubscribed $1 billion deal priced at par on May 18. It was the Miami-based cruise line's eighth pass at the primary market since the onset of the coronavirus pandemic in early 2020.

Elsewhere, the Mineral Resources Ltd. senior notes (Ba3/B+/BB), the 8% notes due 2027 and the 8½% notes due 2030, were both wrapped around 101 on Thursday morning, according to the trader.

In the recent sell-off the 2027 notes bottomed out in a 98 context, while the 2030 notes bottomed out around 97½, the source added.

Both priced at par on April 27 in tranches sized $625 million apiece.

Thursday’s risk-on tide lifted the badly beaten up Coinbase Global, Inc. 3 5/8% senior notes due October 2031, which were up about ½ point at 65¼ bid, 66 offered.

Those bonds, which priced at par in a $1 billion tranche last September, recently traded down to the low-to-mid 60s, or lower, amid a raft of negative news headlines about cryptocurrency, the source recounted.

Meanwhile the bonds of rising star HCA Healthcare Inc., which saw its senior unsecured debt upgraded to investment grade BBB- by S&P Global Ratings on Wednesday, were up in active trading on Thursday morning.

The HCA, Inc. 3½% senior notes due 2030 were 92¼ bid, 93 offered on Thursday morning after trading at 90¼ on Wednesday, the trader said.

ETFs see inflows

High-yield ETFs saw $452 million of daily cash inflows on Wednesday, according to a market source.

It’s the second straight big daily inflow for the ETFs, following Tuesday’s $589 million inflow.

Meanwhile actively managed high-yield funds sustained $235 million of outflows on Wednesday, the source said.

The combined funds are tracking $150 million of net inflows for the week to Wednesday’s close as the market awaits a weekly report on the cash flows of the various asset classes, expected later Thursday from Refinitiv Lipper, the market source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.