Trio of junk bonds price; Carnival, Curo lower in volatile secondary; Freeport-McMoRan active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 26 – An active Wednesday session saw a trio of single-tranche speculative-grade issuers price a total of $1.43 billion of bonds.

It was another wild ride in the secondary space on Wednesday with the market launching the day strong but closing with losses following the Federal Reserve’s highly anticipated announcement.

The market opened the day with gains of about ¼ point but closed the day with losses of about ¼ point, a source said.

“This market is just...,” a source said.

The 10-year Treasury yield skyrocketed as chair Jerome Powell gave his press conference.

The yield held below the 1.8% threshold leading into the Federal Reserve’s announcement. However, it zoomed up afterwards, hitting 1.877% before closing the day at 1.869%.

Powell confirmed what many had feared – the Federal Reserve was prepared to increase interest rates in March – and maintained his hawkish stance towards inflation.

Several outstanding issues were active as market players reposition themselves ahead of earnings and a higher interest rate environment.

Carnival Corp.’s 6% senior notes due 2029 (B3/BB-/B+) were down in active trading.

Losses continued to mount for Curo Group Holdings Corp.’s 7½% senior notes due 2028 (B3/CCC+) with the notes dropping to a 96-handle in above average trading volume.

Freeport-McMoRan Inc.’s senior notes were mixed after the mining company reported earnings with the longer end of the curve losing value while the shorter end gained.

First-timer Eco Material shines

Conspicuous among the new deals in the junk bond primary market on Wednesday was the debut issue from Eco Material Technologies Inc. which came upsized and priced through talk, trading to a handsome premium on the break.

The upsized $525 million issue of 7 7/8% five-year senior secured green notes (B2/B/B+) priced at par, 12.5 basis points inside of the 8% to 8¼% yield talk.

The deal was 3.5-times oversubscribed at close of books, according to a bond trader who had the notes trading at a crisp premium at Thursday's close: 101½ bid, 102 offered.

The next session looks to be active as well.

The megadeal of the week, from athenahealth, is expected to hit the block on Thursday.

On Wednesday the company downsized that offering of eight-year senior notes (Caa2/CCC/CCC+) to $2.35 billion from $2.5 billion, shifting $150 million of proceeds to the concurrent term loan B (demand for the loan is far stronger, sources say).

Pending official talk, the notes offer is in the market with initial guidance in the low-to-mid 6% area.

Also expected to price Thursday are offers from Cerdia Finanz GmbH and Embecta Corp.

The order book for Embecta's $500 million offering of eight-year secured notes (Ba3/B+) was heard to be at deal size on Wednesday, a trader said.

Carnival under water

Carnival’s 6% senior notes due 2029 sank further underwater in active trading on Wednesday.

The notes traded as high as 99¾ during Wednesday’s session.

However, they came in as selling pressure took hold of the market and ended the day in the 98 1/8 to 98¼ context, a source said.

There was about $40 million in reported volume.

Curo losses mount

Curo’s 7½% senior notes due 2028 continued to decline in active trading on Wednesday.

The notes were off another 1 point in high-volume activity.

They were changing hands in the 96 to 96¼ context heading into the close.

There was about $20 million in reported volume on the tape, 10x the average trading volume for the issue, a source said.

The notes have shaved off more than 4 points over the past three weeks. They were trading at par as recently as Jan. 6.

Freeport-McMoRan active

Freeport-McMoRan’s senior notes were mixed following the mining company’s earnings report with the longer duration notes coming in slightly while the shorter duration notes gained.

Freeport-McMoRan’s 5.45% senior notes due 2043 traded largely flat on a 120-handle for the majority of the session, a source said.

However, the late day sell-off pushed the notes down about ¾ point with the last few prints of the day on a 119-handle.

“Someone wanted out,” a source said.

There was about $24 million in reported volume.

However, the company’s 4 3/8% senior notes due 2028 were up about ¼ point from Tuesday’s close.

The 4 3/8% senior notes were wrapped around 104 in active trading.

There was about $20 million in reported volume.

Tuesday fund flows

Actively managed high-yield funds sustained a formidable $1.15 billion of daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Those outflows, coming as they did on the eve of what had been expected to be a momentous Wednesday Fed meeting, were broad-based, the source said.

High-yield ETFs saw $158 million of inflows on Tuesday, according to the market source.

Indexes

The KDP High Yield Daily index climbed 13 points to close the day at 64.4 with the yield now 4.5%. The index was down 5 points on Tuesday and 29 points on Monday.

The CDX High Yield 30 index fell 29 basis points to close the day at 106.91. The index was down 32 bps on Tuesday after rising 19 bps on Monday.

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