Morning Commentary: Junk opens flat to slightly lower; APX, Murphy Oil offerings on deck

By Paul A. Harris

Portland, Ore., Aug. 12 – High-yield bonds opened flat to slightly lower on Friday, sources said.

A New York trader said that although things opened in the green, a sell-off in Europe proved contagious.

Cash bonds were flat to down 1/8 point at mid-morning, the trader said, and added that on an August Friday players appear not as quick to lift.

High-yield ETFs were flat at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up a penny, or 0.01%, at $86.25 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.40 per share, was down a penny, or 0.01%.

Bonds of Ocean Rig UDW Inc. sustained a precipitous drop after the company warned that extremely negative market conditions could drive it into bankruptcy.

Ocean Rig bonds were down 15 points, trading in a context of 25 bid, 28 offered at mid-morning, the trader said.

The new XPO Logistics, Inc. 6 1/8% senior notes due 2023 (B2/B-) were trading at 101 3/8 bid, 101 7/8 offered, having earlier brushed 102 on the offer side, the trader said.

Late Thursday they were 101˝ bid, 102 offered.

The $535 million issue priced at par on Thursday, playing to $2.5 billion of demand, a trader said.

APX, Murphy on deck

In the primary market two deals are set to clear before Friday’s close.

Murphy Oil Corp. ratcheted down price talk on its $500 million offering of eight-year senior notes (B1/BBB-/BB+) on Friday.

New talk is 6 7/8% to 7%, tightened from the 7% area, a trader said, and added that the deal appears to be shaping up at 6 7/8%, with an upsize possible although not likely.

The notes are set to price Friday.

Meanwhile APX Group, Inc., the holding company of Vivint, Inc., talked a planned $100 million tack-on to its 7 7/8% senior secured notes due Dec. 1, 2022 (B) at 103.75 to 104.25.

Books close at 11 a.m. ET on Friday, and the deal is set to price thereafter.

Thursday inflows

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

High-yield ETFs saw $76 million of inflows on the day.

Actively managed high-yield funds saw $50 million of daily inflows on Thursday.

The news follows a weekly report from Lipper US Fund Flows that the dedicated junk bond funds saw $1.66 billion of inflows during the week to Wednesday's close. Of that amount, $1.26 billion went to ETFs, the source said on Friday.

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