Morning Commentary: Junk edges higher trailing debt ceiling news; ETFs see solid inflows

By Paul A. Harris

Portland, Ore., May 30 – The high-yield bond market edged higher on Tuesday morning trailing news headlines indicating that the executive and legislative branches of the U.S. government will likely agree to lift the ceiling on the national debt, sources said.

The recently priced Venture Global LNG Inc. 8 1/8% add-on to its senior secured notes due June 2028 (B1/BB/BB-) was up ¼ of a point, characteristic of the broad market, changing hands at par 7/8, according to a bond trader in New York.

The tap came at par in a $250 million tranche on May 24.

In situational trading, bonds sold by Icahn Enterprises LP were better bid on Tuesday morning on the heels of improvements seen late in the pre-Memorial Day week, the trader said.

The Icahn Enterprises LP/Icahn Enterprises Finance Corp. (Icahn) 4 3/8% senior notes due February 2029 changed hands Tuesday morning at 76, the source said, noting that the bonds were wrapped around 75 last Friday and 72 last Thursday.

The Icahn 6 3/8% senior notes due December 2025 were also better bid on Tuesday morning at 89½ bid, 90½ offered, the trader said.

The Icahn Enterprises share price (Nasdaq: IEP) was 4.55% better at mid-morning, up 94 cents at $21.59.

While the company and its owner, billionaire corporate raider Carl Icahn, remain under attack from short sellers and others, at least where the high-yield market is concerned there appears to be a perception that the Icahn bonds have a lot of asset coverage, the trader remarked.

The new issue market failed to generate any news in the early going on Tuesday.

Two deals on the active forward calendar carried over from the pre-Memorial Day week, sources said.

Document changes surfaced late last week on the Mobius Merger Sub, Inc. $400 million offering of seven-year senior secured notes (B2/B/B+) backing the buyout of MoneyGram International Inc. by Madison Dearborn Partners, the trader said.

Early guidance on the deal was 10½% to 11%.

Meanwhile jailhouse telecom Aventiv Technologies LLC continues its attempt to place $400 million of four-year first-lien senior secured notes (B3/B).

That bond sale has now run for virtually the entire month of May.

Away from those two offerings the new issue market is expected to see at least a modest reactivation later in the holiday-abbreviated May-June crossover week, sources say.

Fund flows

High-yield ETFs saw a solid $342 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, however, sustained $153 million of outflows on the day, the source added.

The combined funds are tracking $1.06 billion of net outflows on the week that will conclude with Wednesday’s close, according to the market source.

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