Morning Commentary: Junk slips as first May session gets underway; outflows continue

By Paul A. Harris

Portland, Ore., May 2 – High-yield bonds underperformed equities as the first market session of the new month got underway on Monday.

With the major U.S. stock indexes posting gains in the early going, the high-yield market was off about 1/8 of a point, according to a bond trader in New York.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down a dime, or 0.13%, at $78.12 at mid-morning.

The Carvana Co. 10¼% senior notes due May 2030 (Caa2/CCC) retraced a bit of lost ground on Monday morning, with the trader marking them 97 bid, 97½ offered versus 96¼ bid, 97 offered on Friday.

The notes price at par last Wednesday in an upsized $3.275 billion deal (from $2.275 billion) that struggled until venture capital firm Apollo Global Management stepped in to take down nearly half ($1.6 billion) of the upsized amount of bonds, sources said.

Meanwhile, bonds sold last week by Mineral Resources Ltd. were trading at discounts to their new issue prices on Monday.

The long maturity notes were faring slightly better, the trader said, noting that the Mineral Resources 8½% senior notes due 2030 (Ba3/B+/BB) were wrapped around 99, while the shorter maturity 8% senior notes due 2027 (Ba3/B+/BB) were 98½ bid, 99¼ offered.

Both issues came at par last Wednesday in tranches sized at $625 million apiece.

There was no new issue news on Monday morning.

The market awaits word on the debut deal from Bioventus LLC, a $415 million offering of five-year senior notes (Caa1/CCC+) that ran a roadshow last week and was expected to price before last Friday's close.

The most recent news on the Bioventus offering came last Wednesday when it was talked to yield 9¾% to 10%, slightly wide to initial guidance in the mid-to-high 9% area.

Fund flows

The dedicated high-yield bond funds sustained $115 million of net outflows on Friday, according to a market source.

High-yield ETFs saw $75 million of outflows on the day.

Actively managed high-yield funds sustained $40 million of outflows on Friday, the source said.

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