Morning Commentary: Decent opening market tone fades into mid-morning; single junk deal on road

By Paul A. Harris

Portland, Ore., Jan. 19 – After opening with a decent tone, the bid for junk bonds was starting to fade heading into mid-morning on Tuesday, according to a trader on the East Coast of the United States.

The CDX HY 25 index was up a quarter of a point, the trader said, and added that cash bonds had been up half a point in some names.

The high-yield ETFs were flat to slightly lower heading into the mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was 11 cents, or 0.14%, lower at $77.80 per share. SPDR Barclays High Yield Bond ETF (JNK), at $32.65 per share, was down 8 cents, or 0.26%.

One on the road

The holiday foreshortened week opened with just a single high-yield offering on the road.

GCP Applied Technologies Inc., which is to be spun off from W.R. Grace & Co., has been marketing a $525 million offering of seven-year senior notes (B1/B+) on a full roadshow.

The deal, via left bookrunner Goldman Sachs, is scheduled to be presented in Boston on Tuessday at an investor lunch set to get underway at noon ET.

The Columbia, Md.-based provider of specialty construction chemicals, building materials and packaging technologies plans to use the proceeds to fund a $500 million distribution to W.R. Grace & Co.-Conn., a direct subsidiary of W.R. Grace, and for general corporate purposes.

Beyond that deal there is a pipeline, sources say, but add that opportunistic issuers are presently on the sidelines awaiting less volatile market conditions.

Modest outflows

The cash flows of the dedicated high-yield bond funds were essentially flat on Friday, a trader said.

High-yield ETFs saw $65 million of outflows on the day.

Actively managed funds saw $10 million of outflows on Friday.

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