Morning Commentary: Junk flat as market limps into Labor Day; cash inflows continue

By Paul A. Harris

Portland, Ore., Aug. 31 – High-yield bonds opened unchanged as the final day of August got underway on Tuesday, sources said.

“Right now, flows are OK, but the market is about to begin limping into Labor Day,” a trader said.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was basically unchanged at mid-morning, at $88.04, down 3 cents or 0.03%.

Although Hurricane Ida disrupted a significant portion of energy production in the United States, she has yet to exert a force on oil prices, sources say.

The barrel price of West Texas Intermediate crude oil for October 2021 delivery was down 57 cents, or 0.82%, at $68.64 at mid-morning on Tuesday.

Also, high-yield energy names have yet to register Ida's impact, the trader said.

Southwestern Energy Co.’s 5 3/8% senior notes due March 2030 (Ba3/BB-/BB-) were 103˝ bid, 104 offered on Tuesday morning, unchanged.

The oversubscribed $1.2 billion issue priced at par on Aug. 16.

The primary market is shuttered and expected to remain so until the post-Labor Day period, when some market sources are expecting a busy-to-hectic September, while others entertain expectations of a somewhat quieter early autumn in the high-yield new issue market.

Meanwhile, a reactivation of the European primary market that was expected to get underway during the final week of August has thus far failed to materialize.

Apart from a couple of Scandinavian deals, the European high-yield new issue market also remains on the sideline.

Monday inflows

The dedicated high-yield bond funds saw $432 million of net daily inflows on Monday, according to a market source.

High-yield ETFs saw $313 million of inflows on the day.

Actively managed high-yield funds saw $119 million of inflows on Monday, the source said.

Monday's inflows follow the $770 million of daily net inflows which the combined funds saw last Friday.

The combined funds are tracking $1.55 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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