Morning Commentary: Junk firm pre-Fed amid weak data; new Martin Midstreams up ¼ point

By Paul A. Harris

Portland, Ore., Feb. 1 – The high-yield bond market was firm at mid-morning on Wednesday, outperforming equities, according to a bond trader in New York.

Stocks came under pressure as private payroll company ADP cited weather-related disruptions as it reported that employers added 106,000 jobs in December, well below analysts’ forecasts of 170,000, sources said.

With the Dow Jones industrial average down 0.96% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was flat at $75.97, up a penny, or 0.01%.

Bonds priced Tuesday by Martin Midstream Partners LP and Martin Midstream Finance Corp. were up ¼ point on Wednesday, after trading up as much as 2 points on the break in super-active trading on Tuesday, a trader said.

The Martin Midstream 11½% secured second-lien notes due February 2028 (Caa1/B/B) were trading just under par on Wednesday morning, after pricing Tuesday afternoon at 97 to yield 12.317% in a $400 million issue, the source said.

Another trader, elsewhere, was marking the bonds unchanged on the morning at 99¼ bid, par ¼ offered, commenting that Martin Midstream was a “very clubby deal.”

Elsewhere, the Mauser Packaging Solutions Holding Co. 7 7/8% senior first-lien notes due August 2026 (B2/B) were up ½ point at 101½ bid on Wednesday morning.

The hefty $2.75 billion issue of 3.5-year paper priced at par in a blowout deal on Monday.

The trader attributed a notable resilience among many recent issues – with some recently minted bonds seeming to trade impervious to financial headlines churning the stock market – to the fact that issuers and dealers continue to bring sizable market concessions.

“People believe these deals are coming cheap,” the trader asserted.

The dollar-denominated primary market remained quiet on Wednesday morning, awaiting pronouncements from the Federal Reserve Bank, as its rate-setting Federal Open Market Committee is set to conclude its January meeting later on Wednesday.

In Europe, Stena AB priced a €325 million issue of Stena International SA five-year senior secured notes (Ba3/BB) at par to yield 7¼%, tighter than talk and deep below initial guidance.

The bonds broke to par 7/8 bid, 101 3/8 offered in the London afternoon, a source said.

In other high-yield bond market news out of Europe, the notes of pub operator Stonegate Group were up as much as 2½ points on news that the company will sell 1,000 pubs and apply the proceeds to repaying its debt.

The Stonegate Pub Co. Financing 2019 plc 8¼% senior secured notes due July 2025 were trading in a context of 94 bid, 95 offered, up perhaps 2 points, a London-based senior debt capital markets banker said.

Fund flows

High-yield ETFs sustained $270 million of outflows on Tuesday, according to a market source.

Actively managed high-yield funds were flat- to slightly positive on the day, posting $5 million of inflows on Tuesday, the source said.

The combined funds are tracking $991 million of net outflows for the week, which concludes with Wednesday's close, according to the market source.

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