Midday Commentary: Europe high-yield holding in despite noise; Ashland long bonds well bid

By Paul A. Harris

Portland, Ore., Feb. 26 - High-yield markets in Europe and the United States are bucking the headline-generated headwinds that drove equity prices south on Monday in the United States and continue to do so in Europe.

In spite of uncertainty surrounding Italian politics, and Italian politicians' will to maintain austerity in order to bring down sovereign debt, Italian bonds have generally held in well since Monday's news on the Italian elections, according to a debt capital markets banker in London.

The new Italcementi Finance SA 6 1/8% senior notes due February 2018 were 102 bid on Tuesday morning, ½ point off their highs but still well above new issue, the banker said.

The deal priced at 99.477 to yield 6¼% (Ba2/BB+) in a €350 million issue on Feb. 14.

Volatility has created more pressure for higher beta Italian names.

The Wind Acquisition Finance SA PIK notes were 101¾ bid on Tuesday morning, down 2¼ points since last Friday.

The widely followed European SovX Crossover index was at 466 bps bid on Tuesday, 20 bps wider on the day, according to the source, who added that European high yield actually advanced on Monday, in spite of the headline noise.

Quiet in the U.S.

The U.S. high-yield market remains mostly sidelined, although the headline noise out of Europe is not the prime factor holding down trading volumes, and practically sidelining new issues, a portfolio manager said on Tuesday.

The J.P Morgan High Yield Conference is underway, and companies are still wending their way through the "earnings reporting" blackout period, the source explained.

Yankee names also are holding in well.

The new Ashland Inc. 6 7/8% notes due 2043 are at their highs at 104¾ bid; they were 104½ bid, 105 offered on Friday.

New Station Casinos 7½% notes due 2021, which were trading at a small premium on Monday, were wrapped around new issue price on Tuesday, the manager said, citing them at 99½ bid, par ½ offered. The bonds were par bid at the underwriter on Tuesday, according to the manager, who added that on Monday the underwriter had them bid just below par.

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