Morning Commentary: Western Digital bonds rally on revenue expectations; primary quiet

By Paul A. Harris

Portland, Ore., Jan. 25 – The high-yield index opened firm on Friday, up 1/8 point to ¼ point at mid-morning, according to a bond trader in New York.

Against a backdrop of strong equity prices, high-yield ETFs were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.31%, or 26 cents, at $84.46 per share.

Bonds of Western Digital Corp. saw price improvement as the San Jose, Calif., data storage company professed confidence on its earnings call that it will achieve cost cuts and realize revenue improvements in the second half of 2019, the trader said.

The Western Digital 4¾% senior notes due February 2026 traded at 91 on Friday morning, up 2 points.

Among recent issues, the Altice USA 6½% senior guaranteed notes due February 2029 (Ba2/BB-) were trading above their new issue price on Friday.

The bonds, which came in an upsized $1.5 billion (from $1 billion), were par 5/8 bid, par 7/8 offered after pricing at par in a Thursday drive-by, at the tight end of the 6½% to 6¾% talk.

New bonds issued earlier in the week by Vistra Energy Corp., the 5 5/8% senior notes due February 2027 (Ba3/BB), were wrapped around par on Friday.

Those notes priced at par on Tuesday in an issue that was upsized to $1.3 billion from $700 million.

Meanwhile the revived new issue market, which cranked out a $6.25 billion burst of issuance during the holiday-abbreviated week that began last Tuesday, after spending late November through mid-January in a persistent vegetative state, took a breather on Friday.

At mid-morning Friday a $2.2 billion active forward calendar included the Dun & Bradstreet Corp. buyout bonds, $500 million secured and $850 million unsecured, and Studio City Co. Ltd.'s $425 million refinancing deal, both expected to clear during the January-February crossover week.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a trader.

High-yield ETFs sustained $299 million of outflows on the day.

However actively managed high-yield funds saw $30 million of inflows on Thursday, the trader said.

News of Thursday’s daily flows trails a Thursday afternoon report that the combined junk bond funds sustained $264 million of outflows in the four-session, holiday foreshortened week to Wednesday's close, according to Lipper US Fund Flows.

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