Morning Commentary: Junk opens unchanged in thin trading; funds see Monday inflows

By Paul A. Harris

Portland, Ore., Aug. 28 – High-yield bonds opened unchanged on Tuesday, sources said.

Although liquidity was characteristically thin heading toward the extended Labor Day holiday weekend, which gets underway following Friday's close, there was a certain amount of activity in the secondary market, a New York-based trader said.

Actively traded names include HCA Inc., Valeant Pharmaceuticals International, Inc. and CenturyLink Inc.

Although CenturyLink's share price was down 19 cents, or 0.77%, at $22.70 at mid-morning, the bonds were up ¼ of a point, with the 7½% notes due 2024 at 107¼ bid, 107¾ offered, the trader said.

Spring-Summer new issues tended to be holding well above respective new issue prices.

Outliers include the AmWINS Group, Inc. 7¾% senior notes due July 2026 (Caa1/B-), which priced at par in a $300 million issue in late June.

In late August those bonds have been holding around 105 bid, 106 offered, said the trader, who added that they last traded last Friday at 105¾.

Among several underperformers, the GFL Environmental Inc. 7% senior notes due June 2026 (Caa1/B-) are 94½ bid, 95½ offered.

Those bonds traded Monday at 95, the trader said.

The $400 million issue priced at par in early May.

The major currencies new issue market is dormant and is expected to remain so until the Labor Day weekend concludes on Sept. 4, whereupon a substantial pipeline of deals is expected to begin coming to market.

Estimates for September new issue volume have been as high as $25 billion.

However, the Nordic new issue market remains open, heading into summer’s end.

Ship Finance International Ltd. was scheduled to begin a series of meetings with fixed income investors on Tuesday, ahead of an expected five-year krone-denominated senior unsecured bond.

Monday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Monday, a trader said.

High-yield ETFs saw $303 million of inflows on the day.

Actively managed funds saw $15 million of inflows on Monday, the trader added.

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