Morning Commentary: Spectrum Brands brings $400 million; new Comstocks continue climb

By Paul A. Harris

Portland, Ore., Feb. 19 – The junk bond index had both feet planted on firm ground Friday morning, with prices ¼ to ½ points better, sources said.

Hopeful news on the pandemic front is stoking a further rally, according to a buyside source.

JPMorgan is looking for the pandemic to end within 40 to 70 days, the source said, citing a report that the bank made to its clients.

That report went on to cite approximately $30 trillion equivalent of global stimulus, record household cash reserves, gains in home equity and stock portfolios, and a consumer debt service ratio at a 40-year low as signs pointing to a big year in 2021, the source added.

A rising tide took unsecured bonds recently placed by cruise operator Carnival Corp. above par after that paper had generally lagged new issue price since it was printed, a trader said.

The Carnival 5¾% senior notes due 2027 (B2/B+) were par bid, par 1/8 offered Friday morning, up from 99¾ bid on Thursday, according to the trader.

Slightly later another trader had them as good as par ¼ bid.

The massive $3.5 billion issue priced at par on Feb. 10.

Carnival's other recent unsecured issue, the 7 5/8% senior notes due March 2026, were also firm at 105 bid, a trader said.

That $1.45 billion deal came at par last November.

Split single B/triple C bonds priced Thursday by Comstock Resources, Inc., the 6¾% senior notes due March 2029 (Caa1/B/B+), were turning in a solid secondary market performance Friday morning at 102 3/8 bid, according to a bond trader.

The upsized $1 billion issue (from $750 million) came at par, playing to $4.4 billion of demand, with investors facing mean allocations of the paper, sources said.

In the primary market Spectrum Brands Inc. plans to price a $400 million offering of 10-year senior notes (existing ratings B2/B/BB) in a Friday drive-by.

Initial guidance has the notes coming to yield in the low 4% area.

Thursday inflows

The dedicated high-yield bond funds saw moderate net inflows of $133 million on Thursday, according to a market source.

Actively managed high-yield funds saw $115 million of inflows on the day.

High-yield ETFs saw $18 million of inflows on Thursday, the source.

News of Thursday’s daily flows followed a Thursday report that the combined funds sustained $1.347 billion of net outflows in the week to Wednesday's close, according to Refinitiv Lipper Fund Flow Report Newsline.

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