Morning Commentary: Junk market opens with solid tone; Medical Properties offers $400 million notes

By Paul A. Harris

Portland, Ore., Feb. 17 – The high-yield bond market opened with a solid tone on Wednesday, according to a bond trader.

Trading in junk was busy but not racing, the source added.

Topical names include London-based mining firm Anglo American plc, which was downgraded to junk by Moody's Investors Service and Fitch Ratings earlier in the week.

Complicating this trade were earnings, the source remarked.

The company said weaker rough diamond demand was partially offset by increased sales volumes at Coal Australia, Coal South Africa, Kumba Iron Ore and Platinum. Anglo American also said that significantly weaker operational cash flows were, for the most part, offset by a $2 billion reduction in capital expenditures.

High-yield ETFs were stronger heading into the New York mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 68 cents, or 0.89%, at $77.47 per share. SPDR Barclays High Yield Bond ETF (JNK), at $32.33 per share, was up 28 cents, or 0.87%.

Medical Properties on tap

In the primary market Medical Properties Trust, Inc. plans to price a split-rated $400 million offering of eight-year senior notes (expected ratings Ba1/BBB-) on Wednesday.

The deal, which is set to price on the investment-grade desk, is playing to keen interest among both high-yield and investment-grade accounts, sources say.

BofA Merrill Lynch, Barclays, Wells Fargo Securities LLC, Goldman Sachs & Co., J.P. Morgan Securities LLC and KeyBanc are the joint bookrunners.

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