Junk heads quietly into holiday break with firmer tone; post-holiday primary revival expected

By Paul Deckelman and Paul A. Harris

New York, Sept. 2– The high-yield market closed out the week on Friday on a very quiet note, traders said, heading into the extended Labor Day holiday break in the United States with a generally firmer tone.

Friday was officially a full, regular session, with no early pre-holiday close scheduled – although as a practical matter, desks were lightly staffed, and many participants hit the exits early.

The holiday hiatus includes a scheduled full-day close on Monday for high yield and other U.S. fixed-income markets.

As has been the case throughout the week, and really for most of the past two weeks, no activity was seen in the dollar-denominated domestic junk bond market.

However, market sources said that once the holiday break is history it should be back to business with a vengeance in the junk primary sphere.

Some of those sources anticipate a quick and intense return of new-deal activity, theorizing that issuers will want to get their deals done sooner rather than later against the possibility that the Federal Reserve might choose to raise interest rates at its policy committee’s September meeting – even though August jobs-creation numbers released by the government Friday morning were below expectations, leading some other observers to question whether the Fed will, in fact, pull the trigger on a September rate hike.

With world oil prices spiking upward after several straight days of large losses – an upturn propelled by the prospect that major producers Russia and OPEC might agree on limiting production – oil and natural gas names such as Chesapeake Energy Corp., Continental Resources, Inc., Whiting Petroleum Corp. and SM Energy Co. were all seen improved.

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