Morning Commentary: Junk opens weaker; new Hill-Rom bonds up 1½ points; funds see inflows

By Paul A. Harris

Portland, Ore., Aug. 19 – High-yield bonds traded lower during the New York morning, sources said.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.18 per share at 86.09, heading into the New York midday.

The SPDR Barclays High Yield Bond ETF (JNK) was 0.09 lower at 37.03 per share.

However recent issues continue to turn in strong secondary market performances.

The new Hill-Rom Holdings, Inc. 5¾% senior notes due Sept. 1, 2023 (B1/BB-) were up a point and a half, according to a portfolio manager, who attributed the strength to the quality of the issue.

The manger had the new Hill-Rom paper at 101¼ bid.

The deal, which priced at par on Tuesday in a $425 million issue, traded up right out of the gates, according to a bond trader in New York, who added that the first trades seen were in the context of par ½ bid, 101 offered, and there were good two-way flows.

Oneok Inc.’s 7½% senior notes due Sept. 1, 2023 (Ba1/BB+), also one of Tuesday’s two deals, were above new issue price on Wednesday at 99 3/8 bid, sources said.

The $500 million bullet priced at 98.522 to yield 7¾%.

Post Holdings, Inc.’s 7¾% notes due March 15, 2024 and the 8% notes due July 15, 2025 – stalwarts among recent issues in terms of secondary market performance – were both 102 1/8 bid, 102 3/8 offered on Wednesday morning, the portfolio manager said.

The New York trader was not seeing a lot of activity in the name.

The bonds came last week in a $1.2 billion overall transaction that saw both tranches price at par, at the wide ends of talk that had widened significantly from earlier guidance.

Quiet primary

The new issue market languished Wednesday morning, with just one deal on the active calendar.

Price talk on KIK Custom Products Inc.’s $390 million offering of eight-year senior notes (Caa2/CCC) is heard to have undergone further widening, a buyside source told Prospect News.

The deal appears to be coming together with an 11% yield at a significant discount, the source added.

To recap, on Monday KIK talked the deal to price at a discount with an all-in yield of 10½%, 100 basis points wide of initial guidance in the mid-9% context, market sources said.

In addition to price talk, covenant changes also surfaced on Monday.

Books remained open beyond Tuesday’s scheduled 2 p.m. ET close, the buysider said, adding that the deal should price Wednesday.

Funds see inflows

The cash flows of the dedicated high-yield funds were positive on Tuesday.

High-yield ETFs saw $165 million of inflows on the day.

Asset managers saw inflows of $15 million on Tuesday.

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