Morning Commentary: Junk firms as Trump moderates China trade gambit; calendar grows

By Paul A. Harris

Portland, Ore., June 27 – Junk bond prices improved as did stocks and Treasuries on the back of news that U.S. president Donald Trump eased off his hardline rhetoric regarding a trade dispute with China, which helped to allay investor apprehensions about an all-out trade war, a bond trader said.

High-yield ETFs, meanwhile, were flat to slightly negative at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 6 cents, or 0.06%, at $85.64 per share.

High-yield ETFs saw $112 million of daily cash outflows on Tuesday, the trader said. Actively managed high-yield funds saw $16 million of outflows on Tuesday.

In the energy sector, which comprises about 15% of the high-yield index, crude oil prices were rallying hard.

The barrel price of West Texas Intermediate crude for August 2018 delivery was up $2.04, or 2.89%, at $72.57 at mid-morning.

Big calendar grows

What has become the year's biggest active deal calendar to date took aboard new entrants on Wednesday morning.

CHS/Community Health Systems plans to price $1,027,000,000 of 5.5-year senior secured notes on Thursday.

Credit Suisse is the left bookrunner for the debt refinancing deal.

Transocean Guardian Ltd. rolled out $700 million of 5.5-year senior secured notes with a Wednesday launch.

That debt refinancing deal, via left bookrunner Goldman Sachs, is also set to price on Thursday.

And McClatchy Co. plans to price a $310 million offering of eight-year senior secured notes (expected ratings B1/B-) before the end of the week.

Initial guidance has the deal coming at a to-be-determined discount to yield in the 9½% area, a trader said.

J.P. Morgan Securities LLC is leading the offering by means of which McClatchy says it intends to redeem its 9% senior secured notes due 2022.

Nearer at hand, at least two deals that have been running investor roadshows are on deck to price on Wednesday, a trader said.

Enterprise Development Authority, a tribal gaming enterprise, plans to price $440 million of five-year senior secured notes (B-). Talk has the deal coming with a 10½% coupon at 98 to yield 11%, the trader said. That's wide of initial guidance in the high 9% to low 10% area.

And Stars Group Holdings BV is up with $750 million of eight-year senior notes (Caa1/B-/B-). The early talk had that deal coming in the low-to-mid 7% area.

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