Morning Commentary: Big book drives tighter pricing on Tenneco; ETFs see big outflows

By Paul A. Harris

Portland, Ore., Nov. 13 – High-yield bonds opened unchanged on Friday as equity prices improved in the early going, according to a bond trader.

Later in the morning, another trader saw things firmer, with an unmistakable bid in the market.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.33%, or 28 cents, at $85.43 per share at mid-morning.

The new Chemours Co. 5¾% senior notes due November 2028 (B1//B) were 101 bid, 101¼ offered.

The upsized $800 million (from $750 million) issue of eight-year non-call three-year notes came at par on Thursday.

Investors, while relinquishing some duration coverage to the Chemours non-callable 5 3/8% notes due 2027, liked the price concession that the new 5¾% paper made to the 2027 bullet, a trader said.

In the primary market, a solid-or-better order book enabled Tenneco Inc. to reel in pricing on its $500 million offering of senior secured notes due Jan. 15, 2029 (Ba3/B/BB).

Official talk in the 8¼% area surfaced on Friday morning after initial pricing discussions took place in the high 8% area.

The offer was playing to $2 billion of orders at Thursday's close, a trader said.

Meanwhile the Tervita Corp. $500 million offering of five-year senior secured second-lien notes (B3/CCC+) remains a work in progress, sources say.

It was talked Thursday with an all-in yield in the 11% area, having widened from initial talk by 100 basis points, and is offered with 2 points of original issue discount.

The deal, on deck for Friday, may get pushed into the week ahead, a bond trader said.

Apart from that modest Friday issue calendar, market participants in the northeastern United States are hoping for a virtual whiff of spring via the Masters golf tournament, which will be televised from Georgia.

After 1 p.m. ET on Friday the ranks will thin, a trader forecast.

Thursday outflows

High-yield ETFs sustained $1.055 billion of daily cash outflows on Thursday, according to a market source.

Actively managed high-yield funds saw $150 million of inflows on Thursday; hence, the combined funds sustained $905 million of net outflows on the day, the source said.

News of Thursday’s daily flows follows a report that the combined dedicated high-yield funds saw a huge $4.565 billion of inflows in the week to Wednesday's close, according to the Refinitiv Lipper Fund Flow Report Newsline.

That's the biggest weekly inflow since the week ending June 10, the market source said.

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