Morning Commentary: Junk surges in Monday trading; AmeriGas on deck with $1.35 billion deal

By Paul A. Harris

Portland, Ore., June 20 – The high-yield market surged higher on Monday morning, propelled – as were other financial markets around the globe – by recent polls suggesting that voters in the United Kingdom appear inclined to elect to remain in the European Union when they vote on Thursday, a trader on the East Coast of the United States said.

Cash bonds were up ½ point to 1 point and more, the trader said.

High-yield ETFs were buying, but there was also a small amount of buying on the part of real money accounts, and a lot of short covering, the source added.

The high-yield ETFs were sharply higher at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 68 cents, or 0.81%, at $83.81 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $35.27 per share, was up 32 cents, or 0.92%.

Energy names higher

With the barrel price of West Texas Intermediate crude up 1.69% at mid-morning, the bonds of high-yield issuers in the energy sector saw improvement that was proportional to the move in crude, the trader said.

Recently issued bonds of Weatherford International Ltd., which were trading at heady discounts to par last week – as crude tumbled below $50 per barrel – clawed part of the way back in early Monday trading, the source said.

The Weatherford 7¾% senior notes due June 15, 2021 were 98½ bid, 99¼ offered on Monday. The longer-dated 8¼% notes due June 15, 2023 were 97¼ bid, 98¼ offered.

Both were well off their lows, up a point relative to their Friday levels, the trader said.

Weatherford priced $1.5 billion of the notes (B2/BB-) at par in two $750 million tranches on June 10.

Away from the energy space the new 20-year bullet paper from L Brands, Inc., which generally held in through last week’s volatility, were up ½ point on Monday.

The L Brands 6¾% senior notes due July 1, 2036 (Ba1/BB+) were par 1/8 bid, par 5/8 offered on Monday morning.

The $700 million issue priced at par on June 13.

And the bonds of Dell Inc. were up a point with the rest of the market on reports that it is proceeding to sell assets, as the market anticipated it would do, the trader said.

AmeriGas plans drive-by

Primary market activity is expected to be muted in the run-up to Thursday’s Brexit vote in the United Kingdom, sources say.

However one on-the-run issuer did appear with a big drive-by deal on Monday morning.

AmeriGas Partners, LP plans to price $1.35 billion of senior notes (Ba3//BB) in two bullet tranches on Monday.

The debt refinancing deal features eight-year notes with initial yield guidance of 5¾% and 10-year notes with initial guidance of 6%.

Books close at 1 p.m. ET, and the public offering is set to price thereafter.

BofA Merrill Lynch, Citigroup, JPMorgan and Wells Fargo are the joint bookrunners.

Friday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Friday, the trader said.

High-yield ETFs were flat, sustaining $5 million of outflows on the day.

Actively managed funds saw $50 million of outflows on Friday.

The dedicated loan funds were also negative on Friday, sustaining $45 million of outflows on the day.

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