Morning Commentary: Illiquid high-yield market opens week flat; funds see mixed Friday flows

By Paul A. Harris

Portland, Ore., Aug. 28 – Liquidity in the high-yield bond market remained ultra-thin on Monday as the market tracks through the final sessions counting down to the extended Labor Day holiday weekend, which gets underway following Friday's close.

Against a backdrop of flat equity prices high-yield ETFs were flat at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was unchanged at $88.22 per share.

Amid concerns that Hurricane Harvey could impair or even close hospitals in Houston and surrounding cities, the hospital sector was flat, a trader said.

The bonds of HCA Inc., which has facilities in the Houston area, were unchanged. The HCA 5 3/8% senior notes due Feb. 1, 2025 were 104¾ bid at mid-morning, unchanged.

Among recent issues, the Big River Steel LLC 7¼% senior notes due 2025 (B3/B) maintained a strong premium to the new issue price at 103½ bid on Monday.

The $600 million issue priced at par on Aug. 15.

However the Staples Inc. 8½% senior notes due Sept. 15, 2025 (B3/B-), at 96½ bid on Monday, continue to be marked lower.

Late last week they were spotted at 96¾ bid, 97¼ offered.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the trader said.

High-yield ETFs saw a substantial $213 million of inflows on the day.

However actively managed high-yield funds sustained $295 million of outflows on Friday, the trader said.

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