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Morning Commentary: High-yield secondary flat; energy improves as crude oil futures soar
By Abigail W. Adams
Portland, Me., March 8 – The high-yield bond primary market was again quiet early Thursday with no deals on the horizon as risk assets remained volatile.
The secondary space was equally quiet following Monday’s broad sell-off with the market flat after sinking up to 1 point during Monday’s session.
Credit spreads hit their widest level since December 2020 at 425 basis points on Monday, according to a market source.
While the secondary space has held up relatively well compared to the sell-off in equities, Monday may have been an inflection point with the market poised to make a meaningful move lower.
The war in the Ukraine, surging crude oil futures, inflation and the Federal Reserve’s meeting next week continued to weigh on the market.
Crude oil futures continued their meteoric rise on Tuesday as the market priced in sanctions on Russian oil exports.
WTI crude oil futures were $126.81, an increase of $7.41 or 6.21%, at about 11 a.m. ET. Brent crude oil futures were $131.09, an increase of $7.92 or 6.43%.
While surging oil prices have elevated inflationary concerns, the move has continued to bolster energy credits which remained well bid, despite the sellers in the market.
Occidental Petroleum Corp.’s 3˝% senior notes due 2029 were up 1 point over the past two days, according to a market source. The notes were changing hands in the 99 7/8 to 101 1/8 context early Tuesday.
Meanwhile, fund flows were mixed on Monday with ETFs, the most recent session data was available. High-yield ETFs saw inflows of $98 million while actively managed funds saw outflows of $71 million.
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