Morning Commentary: Recent issues move higher as junk firms; funds see big outflows

By Paul A. Harris

Portland, Ore., Aug. 16 – High-yield bonds firmed Friday on the back of upbeat metrics, including housing permits and consumer spending, appearing to depict a U.S. economy holding its own, market sources said.

High-yield ETF share prices were higher on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.31%, or 27 cents, at $86.08 per share.

Some recent issues that had been lagging issue prices earlier in the week were trading above par on Friday morning, according to a New York-based bond trader.

The two longer dated tranches of Tenet Healthcare Corp.'s senior secured first-lien notes (Ba3/BB-) were both trading above par on Friday, the trader said.

The Tenet 4 7/8% notes due January 2026 and 5 1/8% notes due November 2027 were both par ½ bid, 101½ offered on Friday morning. Both bonds were seen trading below par earlier in the week.

Tenet's short maturity piece, the 4 5/8% notes due September 2024 – added subsequent to the deal announcement and priced cheap to existing Tenet paper, according to sources – continued to outperform the two longer tranches on Friday at 101Ύ bid, the trader said.

Tenet priced Monday in a $4.2 billion megadeal – the most recent junk bonds to clear the market – in a transaction addressing nearer maturities.

A lot of investors holding those nearer maturity bonds “rolled” into the new paper, a buyside source said.

The Clear Channel Outdoor Holdings, Inc. 5 1/8% senior secured notes due August 2027 (B1/B+) were up Ό point at 101 bid on Friday, the trader said.

The $1.25 billion issue priced at par on Aug. 9.

Elsewhere, the Sinclair Broadcast Group Inc. (Diamond Sports Group/Diamond Sports Finance Co.) 6 5/8% senior notes due 2027 (B2/B) were 101½ bid on Friday morning.

A $1.83 billion tranche of that paper priced at par in mid-July.

Meanwhile, a split-rated Thursday deal from Gaming & Leisure Properties Inc. (GLP Capital, LP/GLP Financing II, Inc.) was tighter on Friday.

The 3.35% senior notes due September 2024 were Treasuries plus 185 basis points bid on Friday, having priced Thursday at 195 bps.

The 4% senior notes due January 2030 (long 10-year paper) were 242 bps bid on Friday, versus the 250 bps issue price.

The $1.1 billion two-part issue (Ba1/BBB-/BBB-) came in a straight-up high-grade execution.

Crossover accounts appeared to be active in the name on Friday, the trader said.

The high-yield primary market was quiet on Friday morning and might remain quiet through the run-up to the extended Labor Day holiday weekend – the bond market's traditional summer terminus – set to get underway following the Friday, Aug. 30, close, sources say.

Big Thursday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Friday, according to a market source.

High-yield ETFs saw a very hefty $722 million of outflows on the day.

Actively managed high-yield funds saw $225 million of outflows on Friday, the source said.

News of Thursday's outflows followed a Thursday afternoon report that the combined high-yield funds saw $346 million of inflows in the week to Wednesday's close.

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