Morning Commentary: Ford maintains premium in active trading; Bally and IEA on deck

By Paul A. Harris

Portland, Ore., Aug. 6 – The high-yield market opened unchanged on Friday, market sources said.

For the first time this week junk ETFs were buyers on Friday, according to a bond trader.

However high yield widened during the first week in August, the trader added, noting that the Merrill Lynch index yield-to-worst was 16 basis points wider during that interval, at Friday's open.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was absolutely flat at midmorning, at $87.49, unchanged on a price basis, but being marked 0.01% better on the morning.

Among recent issues the Ford Motor Credit Co. LLC 2.7% senior notes due August 2026 (Ba2/BB+/BB+) were par ½ bid, par ¾ offered in very active trading, a trader said.

The bullet deal came at par in a $1.5 billion issue on Thursday, the color being that books closed early, not long after demand topped $2 billion.

The new Crocs, Inc. 4 1/8% senior notes due August 2031 (B1/BB-) traded to a premium on Thursday, and maintained that premium on Friday morning, par ½ bid, par ¾ offered, in less active trading, the trader said.

The $350 million issue priced at par on Thursday, playing to a book heard to be five-times oversubscribed, driven by a decent amount of reverse inquiry.

The company's share price (Nasdaq: CROX) is up over 130% on the year, the trader noted, adding that Crocs are immensely popular among nurses and other health care workers, and just about wherever the premium is placed on comfort rather than fashion.

Elsewhere among recent issues, the Chemours Co. 4 5/8% senior notes due November 2029 (B1/B) – one of the week's conspicuous underperformers, among new issues – was slightly better on Friday, at 99½ bid, the trader said.

The $650 million issue priced at par on Wednesday, playing to what was heard to be modest demand.

Away from recent deals, existing issues, which had been more or less offered throughout the week, were a little better on Friday, the trader said.

In the primary market, the Friday spotlight is trained upon the Bally’s Corp. downsized $1.5 billion two-part offering of senior notes (B3/CCC+/B), a deal that has taken lumps during its early August run along the high-yield road.

Downsized from $2 billion, it had been expected to price Thursday but was held in the market an additional day.

Both tranches launched wide to price talk, late Thursday afternoon: eight-year notes launched with a 5 5/8% coupon at a discount to yield 5¾%, wide of yield talk in the 5½% area (initial guidance was in the 5¼% area), and 10-year notes launched with a 5 7/8% coupon at a discount to yield 6%, wide of yield talk in the 5¾% area (initial guidance 5½% area).

Orders were at or near the original $2 billion deal size on Thursday morning, sources said.

Others, noting the deal's trajectory, called that level of demand into question.

Also on deck for Friday is Infrastructure and Energy Alternatives Inc.'s $300 million offering of eight-year senior notes to yield 6¾% to 7%, wide to initial guidance in the mid-6% area

Thursday fund flows

The daily cash flows of the dedicated high yield-bond funds were largely flat on Thursday, a market source said.

High-yield ETFs saw $49 million of inflows on the day.

However actively managed high-yield funds sustained $20 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds sustained $1.16 billion of outflows in the week to the Wednesday, Aug. 4 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the third negative weekly cash flow in the past four weeks, for the combined junk funds, the market source noted.

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