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Morning Commentary: Junk higher as earnings blackout, Deutsche Bank conference dampen supply
By Paul A. Harris
Portland, Ore., Sept. 28 – The junk bond market was unchanged to slightly better against a backdrop of flat equity prices at midmorning on Wednesday, according to a portfolio manager.
High-yield ETFs were slightly higher. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.15%, or 13 cents, at $87.76 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.54 per share, was up a nickel, or 0.14%.
Among late-summer, early fall issues, the Alcoa Inc. 6¾% senior notes due Sept. 30, 2024 (Ba3/BB-) have hung in very well and were seen as high as 102¾ bid on Wednesday morning, the portfolio manager said.
The $750 million issue came at par on Sept. 22 as part of an overall $1.25 billion two-part deal that also included $500 million of 7% notes due Sept. 30, 2026.
The Versum Materials, Inc. 5½% senior notes due Sept. 30, 2024 (Ba3/BB-), which came at par in a blowout deal on Sept. 21, were 102 bid on Wednesday morning.
Steak n Shake talk
In an otherwise muted primary market, Steak n Shake, Inc. talked its $400 million offering of seven-year senior secured notes (B2/B-) to yield in the 8½% area.
The Jefferies deal is set to price on Thursday.
The Deutsche Bank 2016 Leveraged Finance Conference, underway in Phoenix, is commanding a considerable amount of the market’s attention and serving to subdue new issue activity, the manager said.
So is an end-of-quarter earnings blackout period, sources say.
In the European primary, Sarens Bestuur NV is out with initial price talk in the low-to-mid 5% context on a €125 million add-on to its 5 1/8% senior notes due Feb. 5, 2022 (BB-).
The deal, via ING, BNP Paribas and Degroof Petercam, is set to price Friday.
Tuesday inflows
The cash flows of the dedicated high-yield bond funds were positive on Tuesday, the manager said.
High-yield ETFs saw $92 million of inflows on the day.
Asset managers saw $10 million of inflows on Tuesday.
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