Midday Commentary: Market focused on calendar but trying to firm up; league tables loom

By Paul Deckelman

New York, Sept. 27 - The high-yield secondary market "looks like it's trying to firm up" at midday, a trader said Thursday, "but the focus is still on the calendar," with about half a dozen new deals announced just in the morning, as well as other deals that were already waiting in the wings and expecting to be priced today.

The KDP High Yield Daily index - which on Wednesday plunged by 31 basis points to end at 74.23, its fifth consecutive loss, had moved up slightly to 74.26, while its yield - which on Wednesday had risen by 12 bps, its fifth consecutive rise, to 6.04% - was holding steady at that level.

The trader said that "a few things were gyrating around" among the existing issues, with Chrysler Group LLC's bonds up about a point from Wednesday's low, its 8% notes due 2019 and 8¼% notes due 2021 both topping the 106 bid mark.

"Some of the stuff that got hit the hardest over the last two days is up about a point, while some of the stuff that backed off and didn't trade a lot was maybe flat to up anywhere between a quarter-and-a-half [point]."

"I think as we get more into the afternoon, attention is getting more lined up with the new issues."

Another trader, noting the continued parade of new-deal announcements, said that taken in addition to the deals that had previously been announced and were already expected to price Thursday or Friday, "the underwriters [are trying to jam them all in between now and 5 p.m. [ET] tomorrow - which I think is insane."

He theorized that besides issuers looking to get their deals done before the overall junk market retreats any further and yields continue to back up, investment banks are pushing deals along as the banks keep one eye on the third-quarter league tables, which close Friday.

He said that while "you can do refinancing deals as drive-bys because you know what you're getting" in terms of the issuer being a known quantity, "anything else - a dividend deal, or anything where you're adding leverage - needs more than just a cursory look" by would -be investors.

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