Secondary junk market surges, closes week with gains; Carnival rebounds; Carvana rises

By Abigail W. Adams

Portland, Me., June 24 – The domestic high-yield primary market continued its dormant state on Friday despite the return of a risk-on sentiment to the market.

There remained “a ton of uncertainty,” in the market, a source said, especially with second-quarter earnings around the corner, which may put a further damper on risk appetite.

However, if the market remains stable, sources expect to see some new deals in the coming week.

The rally in risk assets gained momentum on Friday with equities surging and Treasuries stabilizing as the market dialed back its rate-hike predictions.

The cash bond market jumped ½ to ¾ point on Friday with several offers-wanted-in-competition lists circulating, a source said.

However, the OWICs did little to spark trading activity in the space with volumes once again thin.

Fund flows were too muted to stimulate much trading activity, a source said.

Trading volume remained concentrated in large, liquid issues, as it has for much of the week.

Carnival Corp. was the name of the day with the cruise line operator’s capital structure jumping after a better-than-expected second-quarter business update.

Carvana Co.’s high-beta senior notes (Caa2/CCC) were also major benefactors of Friday’s rally with the notes jumping 2 points.

athenahealth Group Inc.’s 6½% senior notes due 2030 (Caa2/CCC/CCC+) continued to see heavy volume although with little change in price following Thursday’s selloff.

Carnival jumps

Carnival was in the spotlight on Friday with the company’s senior notes making large gains in heavy volume after a better-than-expected business update.

Carnival’s recently priced 10½% senior notes due 2030 were the most active in the capital structure.

The notes gained 1½ points to close the day wrapped around 92 with the yield just north of 12%, a source said.

There was $19 million in reported volume.

The cruise line operator’s 6% senior notes due 2029 gained 3 points to rise to a 77-handle, a source said.

The notes were changing hands in the 77 to 77½ context heading in the late afternoon.

The yield on the notes, which closed the previous session at 11.6%, stood poised to close the day at 10 7/8%.

There was $11 million in reported volume.

Carnival’s 5¾% senior notes due 2027 rose 2½ points.

They were changing hands in the 79 to 80 context throughout the session.

Carnival’s senior notes were the major gainers of Friday’s session, a source said.

Carnival’s capital structure was under pressure on Thursday with the market expecting a dire earnings update.

However, Carnival surprised the market and reported an increase in revenue, occupancy and booking volumes.

“The market liked the results,” a source said.

Carvana lifted

Carvana’s senior notes were lifted in Friday’s rally.

The used car e-commerce company’s 10¼% senior notes due 2030 (Caa2/CCC) rose 2 points in active trading.

The notes closed the day at 86 with the yield now 13.159%.

There was $12 million in reported volume.

The $3.28 billion issue is one of the large, liquid issues that remains active during thin volume sessions such as on Friday, a source said.

While less active, Carvana’s 5 7/8% notes due 2028 also gained about 2 points to close the day at 66¼ with the yield 14.18%.

athenahealth active

athenahealth’s 6½% senior notes due 2030 remained active on Friday although mostly unchanged in price following Thursday’s selloff.

The 6½% notes continued to trade on an 85-handle.

They were changing hands in the 85¼ to 85¾ context heading into the market close.

There was $13 million in reported volume.

The 6½% notes sank 2½ points on Thursday despite a green day for the overall market.

Indexes

The KDP High Yield Daily index rose 40 points to close Friday at 55.16 with the yield now 7.41%.

The market gained 12 points on Thursday, fell 20 points on Wednesday and was up 4 points on Tuesday.

The index posted a cumulative gain of 36 points on the week.

The CDX High Yield 30 index jumped 110 bps to close Friday at 89.9.

The index gained 33 basis points on Thursday, fell 7 bps on Wednesday and gained 48 bps on Tuesday.

The index posted a cumulative gain of 184 bps on the week.

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