Morning Commentary: Junk flat ahead of holiday weekend; primary poised to reactivate

By Paul A. Harris

Portland, Ore., Jan. 13 – The high-yield bond market opened unchanged to slightly lower on Friday ahead of the extended weekend in the United States, market sources said.

With the U.S. stock indexes mixed at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat at $76.57, down 0.09%, or 7 cents.

The Venture Global Calcasieu Pass, LLC 6¼% senior bullet notes due January 2030 (Ba2/BB+) were somewhat active, a trader said, spotting them at par 7/8 bid, 101 3/8 offered, unchanged on the morning.

The $1 billion issue priced in a Tuesday drive-by at par.

The Transocean Titan Financing Ltd. (better known by its stock ticker, NYSE: RIG) 8 3/8% senior secured notes due February 2028 (B2/B-) were 101¾ bid, 102¼ offered, also unchanged.

The upsized $525 million issue (from $500 million) priced Monday at par.

The new issue market was quiet ahead of the holiday weekend.

However, the primary market is poised to reactivate in the week ahead, possibly in volume not seen in months, sources say.

One trader, in conversations with clients, said that the market is looking for $3 billion to $5 billion of new issue volume in the week ahead.

Names that came up in that conversation included Norwegian Cruise Line Holdings Ltd., NRG Energy Inc. and Nine Energy Service, Inc.

Another trader said there is a buzz in the market that new issue volume during the holiday-abbreviated Jan. 16 week could be substantially above $5 billion.

One name that came up in this source's conversations with clients was the above-mentioned RIG, which played to big investor demand last Monday and is believed to desire to raise another $500 million to $1 billion should market conditions support such a transaction, the source said.

Fund flows

High-yield ETFs saw $238 million of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds were modestly negative on the day, sustaining $10 million of outflows on Thursday, the source said.

News of Thursday’s daily fund flows trails a Thursday report that the combined funds saw $2.51 billion of net inflows during the week to the Wednesday, Jan. 11 close, according to fund-tracker Refinitiv Lipper.

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