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Morning Commentary: Frontier bonds week as late-year liquidity thins; Lonestar alone in the primary
By Paul A. Harris
Portland, Ore., Dec. 19 – Liquidity in the high-yield bond market continues to thin in proportion to the small number of pages remaining to turn on the 2017 calendar, sources said Tuesday.
Amid thinning liquidity, the bonds of Frontier Communications Corp. were conspicuous on Tuesday morning, as they remain under pressure, a trader said.
The Frontier Communications 11% senior notes due Sept. 15, 2025 were 73½ bid, 74½ offered, down from 76½ bid on Monday.
It's a pretty good move on low volume, perhaps a combination of a couple of sellers, the trader remarked, adding that the Street is long on the name, and nobody appears to be prepared to buy it at the end of the year.
Elsewhere, the high-yield ETFs were lower at midmorning.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was 0.12% lower, down a dime at $87.19 per share.
Lonestar alone
The lights remain on in the new issue market with one deal left to clear, sources say.
Lonestar Resources US Inc. has been marketing $250 million of five-year senior notes (Caa2/B), a debt refinancing deal that might get done on Tuesday, according to a trader.
However, there is still some wood to chop, the source added, noting that the market is anticipating tweaks in the deal’s covenant package.
As the market awaits official talk, pre-talk guidance remains 10¾% to 11% on Lonestar, the trader said.
When that deal clears, the book appears set to close on the 2017 new issue market, sources say.
ETF outflows on Monday
High-yield ETFs sustained $290 million of daily outflows on Monday, according to the trader.
Actively managed funds were flat on the day.
Dedicated bank loan funds sustained $60 million of outflows on Monday, the trader added.
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