Morning Commentary: Jobs report sends junk market ‘ripping,’ Ardagh, NMI notes on deck

By Paul A. Harris

Portland, Ore., June 5 – A stronger-than-expected jobs report, showing that U.S. non-farm payrolls rose by 2.5 million jobs in May, sent the bond market “ripping,” according to a trader based in New York.

Friday’s report from the U.S. Bureau of Labor Statistics set the unemployment rate at 13.3%, a number which, although dire in the extreme, came in far below projections that the Covid-19 pandemic had sidelined as much as 20% of the U.S. labor force.

Despite a flood of new issuance in the past eight weeks, that news sent investors scurrying to chase bonds in the secondary market, source said.

Among recent issues, the Royal Caribbean Cruises Ltd. 9 1/8% senior guaranteed bullet notes due June 2023 (Ba2/BB) were 104 5/8 bid, up 2 points from Thursday's close, a trader said.

The $1 billion issue priced at par on Thursday.

The bonds came in conjunction with $1 billion of 4¼% convertibles that also priced at par on Thursday.

The new convertibles were 114 bid, 115 offered on Friday morning, the trader said.

The new Univision Communications Inc. 6 5/8% notes due 2027 (B2/B) were 101 1/8 bid on Friday morning.

The $1.5 billion deal priced at par on Thursday, having doubled in size from $750 million.

Among distressed energy names, the near maturity QEP Resources, Inc. 6 7/8% senior notes due March 2021 were up 11 points on Friday at 91½ bid, a trader said.

“A month or two ago those bonds were trading in the 40s,” the trader noted.

Farther up the credit spectrum some investment-grade bonds were up 50-plus basis points on Friday morning, according to a trader focused on crossover names.

The primary

As a busy week in the primary market headed toward its conclusion, NMI Holdings, Inc. was on deck with an upsized $400 million (from $300 million) offering of five-year senior secured bullet notes (Ba2/BB) that launched Friday morning at 7 3/8%, deep inside of price talk.

Earlier Friday, talk had ratcheted down to 7 5/8% from the original 7¾% to 8%.

The deal came into the market earlier in the week with guidance in the mid-to-high 8% area.

And in Europe, Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. priced a massively upsized €790 million issue of non-fungible 2 1/8% senior secured mirror notes due Aug. 15, 2026 at 96.5 to yield 2.743% in a Friday drive-by.

The issue size increased from €350 million.

The issue price came at the rich end of the 96 to 96.5 price talk. Initial price talk was 95 to 95.5.

Friday’s mirror notes deal came slightly more than a week after the Dublin, Ireland-based glass and metal packaging manufacturer priced a $715 million add-on to the 4 1/8% senior secured notes due Aug. 15, 2026, on May 28, a deal which, itself, came just two days after a $1 billion tap of the 5¼% senior notes due Aug. 15, 2027, which priced on May 26.

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