Morning Commentary: Early junk market quiet; energy names off with oil lower; AMD retreats

By Paul Deckelman

New York, July 7 – The high-yield bond market was quiet in the early going on both the primary and secondary spheres, market sources said Tuesday morning.

The general tone was easier, in line with the market’s downturn on Monday. The KDP High Yield Daily index, which had plunged by 19 basis points on Monday, was down another 3 bps at mid-morning, registering 70.04. Its yield, which rose by 5 bps on Monday, was up by another basis point at 5.75%.

Energy-related names, which had been knocked down on Monday as crude oil process plunged nearly 8%, continued to retreat on Tuesday as oil prices remained weaker. The West Texas Intermediate contract for August, which had swooned by $4.40 on Monday on the New York Mercantile Exchange, closing at $52.53, was down by another 0.2% at mid-morning Tuesday, dipping to $52.40.

The bellwether oil and gas junk bond issue, California Resources Corp.’s 6% notes due 2024, was seen down 1 point at 81 bid on mid-morning volume of more than $10 million. On Monday, the Los Angeles-based oil and natural gas exploration and production company’s issue had fallen by 2 points on volume of more than $24 million.

Peabody Energy Corp.’s 6½% notes due 2020 were off by ½ point at 30 bid. The St. Louis-based coal operator’s bonds have been under pressure since it warned last week that second-quarter adjusted EBITDA would come in below the company’s earlier estimates and its per-share loss would be wider.

Away from the energy names, Advanced Micro Devices Inc.’s bonds were lower after the Sunnyvale, Calif.-based computer chip maker’s late-Monday warning that its second-quarter revenue would be less than expected. It had previously predicted a 3% sequential drop from the first quarter but now sees an 8% fall-off, citing “weaker-than-expected consumer PC demand.”

AMD’s 7¾% notes due 2020 had slid by 3 3/8 points to 83½ bid, although there had been only several large-sized trades in the credit.

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