Primary closes inactive week; oil names up, Cheniere unit off as Harvey nears; grocers down

By Paul Deckelman and Paul A. Harris

New York, Aug. 25 – The high-yield primary market stayed quiet on Friday, syndicate sources said, finishing out a week in which no new deals were introduced or priced – the first completely empty week in Junkbondland in more than a month.

And the sources said the upcoming week – the final week of August – is likely to be equally quiet as the new deal market remains on its traditional late-summer vacation until after the approaching Labor Day holiday in the United States.

In the secondary market, traders said the lack of new primary supply was a factor causing prices to firm – but they said that flows were low and Friday volume was light.

Among recently priced new issues, electric car maker Tesla, Inc.’s bonds continued to firm but volume in the credit dried up after a week of active trading. Volume picked up in the new paper from office supply retailer Staples Inc.

The approach of Hurricane Harvey – by Friday night a dangerous Category 4 storm packing 130 mph winds – towards the Texas Gulf Coast helped push crude oil prices up on the likelihood of disruption of oil and natural gas production in the area, helping energy names such as sector bellwether California Resources Corp. to firm.

However, the bonds of Cheniere Corpus Christi Holdings LLC – whose liquefied natural gas facilities in that eponymous seaside Texas city lie right within the storm’s path – were sharply lower in active trading Friday.

Elsewhere, supermarket names such as Fresh Market Inc., Ingles Markets Inc., Albertsons Cos. LLC and SuperValu, Inc. retreated for a second consecutive session Friday after retailing behemoth Amazon announced plans to cut prices on many items at Whole Foods Market once its acquisition of the upscale supermarket chain closes, which is expected to occur before the month’s end.

Statistical market performance measures were higher across the board for a second consecutive session on Friday.

For the week, the indicators were all better than where they were last Friday, Aug. 18 – an improvement after being mixed the week before and lower across the board the week before that, ended Aug. 11.

Primary stays inactive

The new issue market was shuttered on Friday and is expected to remain so until after the Labor Day holiday weekend in the United States, which gets underway following the Friday, Sept. 1 close of business.

Cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available press time, a trader said.

High-yield ETFs saw substantial daily inflows of $279 million on the day.

Investors continue to appear to have cash to put to work, as evinced by a preponderance of offers wanted in competition (OWIC) lists from ETFs early Friday, the trader added.

Actively managed high-yield funds sustained $210 million of outflows on Thursday.

The news follows Thursday’s report that dedicated high-yield bond funds saw $1 billion of outflows for the week to last Wednesday’s close, according to Lipper US Fund Flows.

Dedicated bank loan funds saw $15 million of inflows on Thursday, the trader said.

No deals for the week

With, as expected, no new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing on Friday, the slate for the full week ended blank, according to data compiled by Prospect News.

That was down from $4.29 billion which priced in 10 tranches the previous week, ended Aug. 18, and well down from the $8.05 billion in 12 tranches which priced the week before, ended Aug. 11 – the most intense new issue volume since late May.

This week was the second week this year which has seen a complete shutout, volume-wise. No new deals were priced during the week of July 1 through July 7 either.

The lack of deals left year-to-date issuance for 2017 unchanged from last week at $174.39 billion in 325 tranches, running about 16.5% ahead of the $149.67 billion which had priced in 225 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Light volume for the session

In the secondary arena, a trader opined that Friday’s session had been “pretty quiet today – a lot of people out.”

He said that overall, the market had “a pretty good tone to it – I think a lack of [new-deal] supply was helping secondary stuff.

“Overall, things had a pretty firm tone – but with just a very light flow, really small volume.”

A market source at another shop estimated that volume, according to the Trace system, dwindled to $932 million on Friday – well down from the nearly $1.5 billion recorded on Thursday and nearly $2 billion seen on Wednesday.

Tesla trading dries up

Among recently priced issues, Tesla’s 5.3% notes due 2025 were trading around a 98 1/8 to 98 3/8 bid context, which a trader said was “a little better than they had been lately.”

But volume in that new deal shrank to around $4.5 million another trader said – just a fraction of the more than $33 million of that paper which had changed hands on Thursday, when the credit topped the day’s Most Actives list.

The Palo Alto, Calif.-based electric car manufacturer and power storage technology company had priced its $1.8 billion megadeal at par on Aug. 11 after the forward calendar offering was upsized from an originally announced $1.5 billion.

Post-pricing those notes traded well down from their par issue price, albeit on brisk trading volume, gradually sinking to a 97ish range. However, they were mostly better this week, with traders quoting the bonds on Friday around a mid-98ish context.

Among other recently priced issues, Staples’ 8½% notes due 2025 were seen Friday trading unchanged at 97 bid, with a trader estimating volume at around $10 million.

The Framingham, Mass.-based office supply retailer priced $1 billion of those notes at par on Aug. 15; after the issue was first downsized from an originally announced $1.6 billion and then from $1.3 billion. After several days of solid volume, market interest just faded away even as prices eroded. The new Staples paper struggled pretty much from the get-go, bottoming in a 96ish context and most recently seen trading with a 97ish handle.

Harvey hurts Cheniere

The approach of dangerous Hurricane Harvey towards the Texas Gulf Coast helped push crude oil prices up, with October-delivery West Texas Intermediate crude up 44 cents per barrel on the NYMEX at $47.87.

That, in turn translated to better levels for oil-related bond issues such as California Resources’ bellwether 8% notes due 2022, which gained ¼ point on the day to end at 53½ bid.

But traders said that Houston-based LNG processing and storage company Cheniere Corpus Christi Holdings’ bonds were in retreat.

Its 5 7/8% notes due 2025 lost nearly 1½ points to end at 106 9/16 bid, with over $17 million traded, topping the Most Actives list for the day.

Its 5 1/8% notes due 2027 were down by more than a point at 101½ bid on over $10 million of volume while the company’s 7% notes due 2024 fell by ¾ point to 113 1/8 bid, with around $7 million traded.

Grocers’ downturn continues

For a second straight session, supermarket names were seen lower, pushed down by the news that Amazon plans to cut prices for items at Whole Foods Markets when it closes its acquisition on Aug. 28.

Whole Foods competitor Fresh Market’s 9¾% notes due 2023 were off by 5/8 point at 77 7/8 bid, while Albertson’s 6 5/8% notes due 2024 were around unchanged at 96 bid, both on over $7 million of volume.

Ingles Markets’ 5¾% notes due 2023 eased by 1/8 point to 99 1/8 bid, with about $12 million traded.

SuperValu’s 6¾% notes due 2021 were ½ point lower at 98 bid.

Indicators stay firm

Statistical market performance measures were higher across the board for a second consecutive session on Friday. The indicators had strengthened on Thursday after being mixed over the previous four sessions and all lower for one session before that.

For the week, the indicators were better than where they were last Friday, Aug. 18 – their first higher week after a mixed week and then a lower week before that.

For a second session, the KDP Daily High Yield Index rose by 3 basis points on Friday, matching Thursday’s gain as it closed at 71.84, its third straight advance overall after five consecutive losses.

Its yield was unchanged at 5.28%. On Thursday, it had come in by 2 bps, on top of Wednesday’s 1 bp tightening and Tuesday’s unchanged finish.

Those levels compared favorably with last Friday’s 7.83 index reading and 5.30% yield.

The Markit CDX Series 28 High Yield Index pushed upward by around 1/8 point on Friday, matching Thursday’s rise. It went home at 106 7/8 bid, 106 15/16 offered.

That was up from last Friday’s 106 15/32 bid, 106½ offered.

And the Merrill Lynch North American High Yield Index improved for a fifth straight session, firming by 0.094% on Friday, on top of Thursday’s 0.102% advance.

The latest gain raised the index’s year-to-date return to 5.718% from Thursday’s 5.619% close, although it still remains well down from its Aug. 2 finish at 6.233%, its 2017 year-to-date peak level.

For the week, the index rose by 0.344%, its second straight weekly gain.

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