Morning Commentary: Junk sees Friday morning bid; new Microsemi 9 1/8% notes trade to solid premium

By Paul A. Harris

Portland, Ore., Jan. 8 – High-yield bonds were up one-quarter of a point to one-half of a point heading into the Friday mid-morning, according to a trader on the East Coast of the United States.

Early on, the market may have been up as much half a point to three-quarters of a point, the source added.

Nonfarm payroll numbers provided some of the spark, the trader said, noting that the U.S. Bureau of Labor Statistics reported payroll employment rose by 292,000, well above the even 200,000 that the market was expecting.

Also gyrating Chinese equities, the effects of which were said to be rippling throughout the global capital markets earlier in the week, steadied overnight, the trader said, adding that regulators there scrapped a circuit breaker mechanism that halted stock trading twice this week.

The high-yield ETFs were higher at the approach of mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 24 cents, or 0.3%, at $79.97 per share. SPDR Barclays High Yield Bond ETF (JNK), at $33.67 per share, was ups 7 cents, or 0.21%.

New Microsemi 9 1/8% rises

The new Microsemi Corp., Inc. 9 1/8% senior notes due April 15, 2023 (B2/B+) were 102¼ bid on Friday morning, the trader said.

The $450 million deal, the year’s first syndicated issue, priced at par on Thursday, driven to market by a significant amount of reverse inquiry, according to sources.

And it played to a big book, the trader said.

Looking deeper into the secondary market, high-quality names continue to hold in notably against broader capital markets turbulence.

L Brands (Limited Brands, Inc.) 6 5/8% senior notes due March 2021 (Ba1/BB+), a liquid $1 billion issue, was 111 bid, 111¾ offered on Friday morning, perhaps up a quarter of a point on the year, the trader said.

The company put up good same-store holiday numbers, the source commented.

Meanwhile lower quality names have been more prone to be buffeted by the chop, the trader remarked.

However everything appeared to be bid-for early Friday.

High yield has held in pretty well against the S&P 500, the source remarked, noting that while the S&P 500 stock index was down 5% year to date, the HYG ETF was down just 1%.

Outflows continue

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday, the source said.

High-yield ETFs saw a substantial $238 million of outflows on the day.

Actively managed funds were essentially flat, sustaining $5 million of outflows on Thursday.

Those numbers trail a late Thursday report from Lipper-AMG that the high-yield funds saw $809 million of outflows on the week to Wednesday's close.

The dedicated bank loan funds also saw daily outflows of $55 million on Thursday, the trader 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.