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Morning Commentary: Junk weaker as stocks, commodities sell off; August deals robust in secondary
By Paul A. Harris
Portland, Ore., Aug. 31 – Against a backdrop of lower equities and commodity prices, high yield was weaker as the last session of August got underway on the East Coast of the United States, according to a New York-based trader.
Trading volumes were low and liquidity was thin, the trader added.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was 40 cents lower at $85.96 per share.
The SPDR Barclays High Yield Bond ETF was down 12 cents at $36.87.
The barrel price of West Texas Intermediate crude oil for Oct. 15 delivery was down 3.52% early Monday at $43.63 per barrel, $1.59 lower on the day.
Amid the weakness in oil prices, the heavily shorted California Resources Corp. 5% notes due November 2024 were 74½ bid, 75½ offered, down about half a point, the trader said.
Recent deals robust
In the face of the overall weakness, some of the deals that came in August continued to turn in notable performances in the secondary market.
Bonds priced in mid-August by Post Holdings, Inc. were trading near their post-issue highs on Monday.
The Post 7¾% notes due March 15, 2024 were 102½ bid, 103½ offered heading into midday. The 8% senior notes due July 15, 2025 were 103 bid, 103¾ offered.
Both tranches (B3/B) priced at par on Aug. 12 in a $1.2 billion transaction, which saw investors push pricing well beyond both initial guidance and formal price talk.
Meanwhile, despite the bad news from the energy sector, bonds priced at a discount in mid-August by natural gas liquids master limited partnership Oneok Inc. continued to trade at a premium to their issue price as the month was closing out.
The Oneok 7½% senior notes due Sept. 1, 2023 (Ba1/BB+) were trading around par on Monday morning, said the trader, who added that they had traded at 99 last Thursday.
The $500 million issue priced at 98.522 to yield 7¾% on Aug. 18.
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