Morning Commentary: Junk bonds flat in early trading; Western Digital unsecured bonds dip, recover

By Paul A. Harris

Portland, Ore., March 31 – High-yield bonds traded flat heading into the New York mid-morning, with some names a touch better and others a touch softer, a trader said.

High-yield ETFs were somewhat firmer. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 22 cents, or 0.27%, at $81.80 per share. SPDR Barclays High Yield Bond ETF (JNK), at $34.30 per share, was up a dime, or 0.29%.

New Western Digital bonds

New Western Digital Corp. bonds, $5,225,000,000 of which hit the market after pricing on Wednesday, were trading at better prices on Thursday morning, the trader said.

The split-rated 7 3/8% senior secured notes due April 1, 2023 (Ba1/BBB-/BBB-) had moved steadily higher, and were 102 1/8 bid, 102 3/8 offered after having priced at par in an upsized $1,875,000,000 tranche (from $1.5 billion).

However notes in the larger unsecured tranche – the straight speculative-grade 10½% senior unsecured notes due April 1, 2024 (Ba2/BB+/BB+) – had seen more volatile trading, the source said. They were par ¼ bid, par ½ offered heading into the mid-morning after trading as low as 99¾ bid earlier Thursday morning.

The unsecured notes priced at par in a downsized $3.35 billion tranche (from $4.1 billion).

Talk widened dramatically on both tranches of the deal, the overall size of which decreased from $5.6 billion in moves which saw proceeds shifted to the concurrent term loan A, and also saw proceeds shifted to the secured tranche from the unsecured, sources said.

However in the end the deal was oversubscribed, a market source told Prospect News.

Elsewhere the new T-Mobile USA, Inc. 6% senior notes due April 15, 2024 (Ba3/BB), also a large new issue, were unchanged at 101 1/8 bid, 101 3/8 offered on Thursday.

The $1 billion issue came at par on Tuesday.

Wednesday inflows

Dedicated high-yield funds saw inflows on Wednesday, the trader said.

High-yield ETFs saw $292 million of inflows on the day.

Actively managed funds saw $100 million of inflows.

The market awaits a weekly report from Lipper-AMG on the flows of the junk bond funds during the week to Wednesday’s close, expected to come out Thursday afternoon.

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