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High Yield Bond Bids Surge Anew, Hit 10-Week Peak

The average bid of LCD’s U.S. flow-name high-yield bond sample surged 82 bps in today’s reading, to 101.55% of par, yielding 6.26%, from 100.73, yielding 6.27%, on May 18. Within the 15-bond sample, there were 11 gainers, two decliners, and two unchanged issues.

us high yield bond bids

The average bid is now up 66 bps over the last two weeks and 130 bps over the last four weeks. Today’s results show the highest average bid price for the sample since March 2, when the average bid price was 102.10.

While the majority of the constituents were in the black in today’s assessment, there were a few standouts. Community Health 6.875% notes due 2022 increased three points, to 89.25. Also, PetSmart 7.125% notes due  2023 were two points higher, at 94.5. The retailer’s sole existing bond issue has been active in the secondary market following the launch of a $2 billion, two-part offering to back the purchase of Chewy.com.

Meantime, the decliners in today’s reading were Altice 7.75% notes due 2022 at 106, and Dollar Tree 5.75% notes due 2023 at 106.25, both a quarter of a point lower.

MGM Resorts 6% notes due 2023, and Post Holdings 5% notes due 2026 were both unchanged.

The average yield to worst was one basis point lower, at 6.26%, and the average option-adjusted spread tightened nine basis points, to T+436. However, both the average yield and average spread remain wider in comparison to broad high-yield market indices. For example, the S&P Dow Jones U.S. Issued High Yield Corporate Bond Index II closed on May 22 with a yield to worst of 5.38% and an average option-adjusted spread to worst of T+417.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Chesapeake Energy Eyes High Yield Bond Market for $750M Offering

Chesapeake Energy’s proposed $750 million offering of 10-year (non-call five) senior notes is talked at 8–8.25%, according to sources. Books are expected to close at 3 p.m. EDT with pricing to follow via joint bookrunners Citi, Credit Agricole, and J.P. Morgan.

Proceeds will be used to finance a concurrent tender offer for up to $750 million of Chesapeake’s outstanding debt, and for general corporate purposes. The issuer is looking to tender for its 8% senior second-lien notes due 2022, 6.625% senior notes due 2020, 6.875% senior notes due 2020, 6.125% senior notes due 2021, and 5.375% senior notes due 2021.

Chesapeake was last in the market in December when it placed $1 billion of 8% notes due January 2025, also to refinance existing notes. Those notes traded up to 102.25 this morning, yielding around 7.5%, from 99.75 Friday afternoon, trade data shows.

Existing issue ratings are CCC/Caa3. Corporate ratings are B–/Caa1, with positive outlooks on both sides.

Chesapeake Energy (NYSE: CHK) engages in the acquisition, exploration, and development of properties for the production of oil, natural gas, and natural-gas liquids (NGL) from underground reservoirs in the U.S. — Jon Hemingway/Nina Flitman

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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After Big Retreat, Investors Pour $650M into US High Yield Funds

U.S. high-yield funds recorded an inflow of $649.5 million for the week ended May 17, according to weekly reporters to Lipper only. The gain snaps two consecutive weeks of outflows, which totaled $2.1 billion over the period.

US high yield fund flows

ETFs drove the inflows this week, pulling in $687.5 million, while mutual funds reported an outflow of $38 million. This marks a reversal from last week’s $1.7 billion outflow from ETFs and an $18 million inflow into mutual funds.

The four-week trailing average remains in negative territory, rising to negative $292 million, from negative $545 million last week.

The year-to-date total outflows from high-yield funds is now $5.4 billion, with a $4.3 billion exit from mutual funds and a $1.1 billion outflow from ETFs over the period.

The change due to market conditions this past week was an increase of $286 million. Total assets at the end of the observation period were $206.6 billion. ETFs account for about 22% of the total, at $46.3 billion. — James Passeri

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Fridson: High Yield Bonds Might Soon Be Attractive, vs Leveraged Loans

High-yield bonds may soon be fairly valued, or even attractive, relative to leveraged loans.

How do we arrive at such a conclusion? In brief, we adjust for differences in the ratings mix between the two asset classes and compare the three-year discounted spread on the S&P/LSTA Leveraged Loan Index and the option-adjusted spread (OAS) on the BofA Merrill Lynch US High Yield Index.

We convert the difference in these spreads into an index geared to one standard deviation from the mean in either direction. A reading of +1.0 indicates that bonds are extremely rich versus loans and a reading of -1.0 indicates that loans are extremely rich versus bonds.

loan-bond relative value

As the chart illustrates, in February, high-yield bonds were extremely rich versus loans. They ceased to be in March, as the reading dropped from 1.1 to 0.6. That trend continued in April, with loans experiencing more spread-tightening than bonds. At month-end the reading stood at 0.25. If the trend continues at its pace of the past two months, high-yield will reach fair value versus loans this month and even become slightly cheap in relative terms. – Martin Fridson

This analysis is part of Marty’s latest weekly commentary, available to LCD News subscribers on www.lcdcomps.com. As well as his weekly write-up, Marty pens a monthly analytical feature on the high-yield bond world for LCD News.

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LCD is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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High Yield Bond ETFs See $1.7B Investor Cash Withdrawal

U.S. high-yield funds recorded an outflow of $1.7 billion for the week ended May 10, according to weekly reporters to Lipper only, marking the largest outflow since the week ended March 15, when the outflow from the asset class totaled $5.7 billion.

high yield fund flowsThis week’s result was entirely driven by a $1.7 billion outflow from ETFs, while mutual funds recorded a small inflow of $18 million.

The year-to-date total outflow is now $6.1 billion, reflecting a $4.3 billion outflow from mutual funds added to a $1.8 billion exit from ETFs.

The four-week trailing average dropped to negative $545 million from negative $201 million last week.

The change due to market conditions this past week was a decline of $111 million. Total assets at the end of the observation period were $204 billion. ETFs account for about 22% of the total, at $45.5 billion. — James Passeri

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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S&P: YTD Global Corporate Defaults Total 39, with 2 Consumer Prodcuct Cos. this Week

U.S. clothing concern Rue21 and Croatia-based retailer Agrokor missed interest payments this week, bringing the global corporate default tally so far in 2017 to 39, according to S&P Global Fixed Income Research. That’s down from 62 defaults at this point in 2016.

 

corporate high yield defaults

Despite the two retail defaults, the global speculative default rate dipped for the third straight month, to 3.7% as of March 31, from 3.9% the previous month. The rate remains elevated compared to a year ago, when it was 3.1%, according to S&P.

This analysis was written by S&P’s Dian Vazza, Sudeep Kesh, and Nicole Serino. The full analysis is available via S&P Global Fixed Income Research.

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LCD is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.