Morning Commentary: Kepler’s €345 million notes on deck; dollar junk ½ point lower

By Paul A. Harris

Portland, Ore., May 6 – With inflation concerns continuing to drag on the capital markets, sellers were at the controls in the U.S. and European high-yield bond markets on Friday, sources said.

Non-farm payroll numbers that handily exceeded economists' expectations are putting upward pressure on wages, signaling that the cost of doing business continues to rise, a London-based buyside source commented.

With the major stock indexes in negative territory at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.55%, or 43 cents, at $77.60.

The dollar-denominated high-yield bond market was generally down ½ point, a New York-based trader said.

The entire capital structure of DISH Network Corp. was down 3 points to 4 points as the company posted a miss in its quarterly earnings, the trader said, spotting the DISH DBS Corp. (DISH Network) 5 1/8% senior notes due June 2029 at 72 3/8.

Elsewhere, the bonds of DISH competitor DirecTV were also lower, the trader said, marking the DirecTV Holdings LLC/DirecTV Financing Co. Inc. 5 7/8% senior secured notes due August 2027 down 2¼ points at 89½ bid, 90½ offered.

In an otherwise quiet new issue market, Kepler SpA talked its €345 million offering of seven-year senior secured floating-rate notes (B3/B-) with a 575 basis points spread to Euribor at 96 to 97, with no Euribor floor.

The deal, coming in support of the buyout of Italian supplements supplier Biofarma SpA by Ardian SAS from White Bridge Investments., has also undergone document changes.

Books were scheduled to close late Friday afternoon, London time.

Meanwhile the dollar-denominated new issue market was poised to conclude the May 2 week having posted no new issues, with the active dollar-denominated forward calendar empty.

The most recent solid news item in the dollar-denominated primary market came last Tuesday when Bioventus Inc. cited market conditions as it withdrew its $415 million offering of five-year senior notes (Caa1/CCC+), which would have represented the company's high-yield bond market debut.

Fund flows

The dedicated high-yield bond funds sustained $422 million of net daily outflows of cash on Thursday, according to a market source.

High-yield ETFs posted outflows of $322 million on Thursday, ending a three-day string of solid inflows: $873 million on Wednesday, $422 million on Tuesday and $444 million on Monday.

Meanwhile actively managed high-yield funds sustained $80 million of daily outflows on Thursday, the source said.

News of Thursday's daily flows trailed a Thursday afternoon report that the combined funds saw $1.1 billion of net outflows in the week to the Wednesday, May 4 close, according to Refinitiv Lipper.

Those represented the fourth consecutive weekly outflows from the junk funds, the market source noted.

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