Morning Commentary: High yield remains firm; ETFs higher; non-energy high beta names advance

By Paul A. Harris

Portland, Ore., Dec. 16 – High-yield bonds were 1 point to 1½ points higher at mid-morning Wednesday, according to a trader on the East Coast of the United States.

High-yield ETFs were also in positive territory on the day.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 27 cents at $80.39 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $33.94 per share, was up 13 cents.

However in spite of the rally that took hold on Tuesday and continued into Wednesday morning, dedicated high-yield mutual funds were reporting sizable outflows on Tuesday, the trader said.

High-yield ETFs saw $108 million of outflows on the day.

Actively managed funds saw a whopping $1.15 billion of outflows on Tuesday.

“Those number don't jibe with anything we saw yesterday,” the trader said, adding that bond prices were firm throughout Tuesday’s session and remained firm on Wednesday morning.

Badly beaten-up bonds in the high beta steel and wireline communications sectors were outperforming the rest of the market, the trader said.

Steel names were up 3 to 5 points.

ArcelorMittal’s 5½% notes due March 2021 were at 82½ bid on Wednesday, up from 77 bid on Monday. ArcelorMittal announced on Wednesday that it has decided to structure its Americas business with dedicated leadership for four distinct business areas.

Meanwhile energy names, particularly those with exposure to descending crude oil prices, continued to underperform the rest of the market, said the source.

The barrel price of West Texas Intermediate crude was off sharply again on Wednesday morning, at $36.08, down $1.27, or 3.4%

Calendar shot

The primary market remained quiet on Wednesday.

Kraton Polymers, LLC remains in the market with a $425 million offering of eight-year senior notes (B3/CCC+) via Credit Suisse, Nomura and Deutsche Bank.

There was news on Wednesday that Kraton firmed pricing on its $1.35 billion term loan B. Commitments are due at the end of the day.

The loan appears on a trajectory to price soon, the trader said.

However the bonds appear to be 2016 business, the source added.

“It looks like the calendar is shot,” the trader remarked.

© 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.