Morning Commentary: Coinbase bonds take another big hit; junk slips amid volatility

By Paul A. Harris

Portland, Ore., May 12 – Junk opened ¼ point lower on Thursday, with sellers at the controls, according to a bond trader in New York.

Bonds of Coinbase Global, Inc. took another substantial dive amid ongoing volatility that ignited when the cryptocurrency trading platform warned earlier in the week that the ownership of investors' cryptocurrency might come into question should the company file for bankruptcy protection.

The Coinbase Global 3 3/8% senior notes due October 2028 were 58½ bid, 60½ offered on Thursday morning, while its 3 5/8% senior notes due October 2031 were 56¼ bid, 58¼ offered, according to a sellside source.

Both issues of the unsecured paper traded Wednesday in the low-to-mid 60s, sources said.

The Coinbase bonds priced at par in an upsized blowout deal last September in tranches sized at $1 billion apiece.

Bonds of Carvana Co. also took another big hit on Thursday morning as the troubled online car seller was heard to be firing workers, en masse, by means of Zoom, sources said.

The Carvana 10¼% senior notes due May 2030 (Caa2/CCC) were down 1¼ points on the morning at 83 bid, 84 offered, the sellsider said.

Carvana priced $3.275 billion of the 10¼% notes (upsized from $2.275 billion) in late April, with Apollo Global Management reported to have taken down nearly half the upsized issue ($1.6 billion).

Elsewhere, the Frontier Communications Holdings, LLC 8¾% first-lien secured notes due May 2030 (B3/B/BB+) changed hands at 101¼, down almost a point, generally reflecting the move in the market, the sellside source said.

Slightly later a trader had those bonds at 101¼ bid, 101½ offered.

The bonds changed hands at 102¾ on Wednesday morning.

The only deal to clear the dollar-denominated new issue market in nearly two weeks, the upsized $1.2 billion issue (from $800 million) priced Monday at par, coming with 2¾% more coupon and with security that is superior to the Frontier Communications 6% second-lien notes due January 2030, which priced at par last October.

There was no fresh primary market news on Thursday morning.

Wednesday outflows

The dedicated high-yield bond funds sustained $366 million of net daily outflows on Wednesday, according to a market source.

High-yield ETFs saw $207 million of outflows on the day.

Actively managed high-yield funds sustained $159 million of outflows on Wednesday, the source said.

Those daily outflows notwithstanding, the combined funds are tracking $345 million of net inflows for the week to Wednesday’s close, as the market awaits a weekly report on the cash flows of the various asset classes, expected later Thursday from Refinitiv Lipper, the market source said.

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