Twitter softens; Ford declines; Royal Caribbean up; Carnival weakens; junk primary idles

By Paul A. Harris and Cristal Cody

Tupelo, Miss., Oct. 4 – The dollar-denominated primary market remained idle on Wednesday.

In the secondary market, Twitter Inc. bonds dropped down more than 1 point in fairly heavy trading totaling more than $17 million Wednesday, a day after climbing higher on a potential revived $44 billion takeover offer from Elon Musk.

Twitter’s 5% notes due 2030 (Ba2/BB+) gave back a little over 1 point to trade under 99 bid, well off of gains as much as 4½ points seen Tuesday, a source said.

The notes had traded Tuesday as high as 101¼ before falling back to par ¼ and going out 3½ points higher on the day.

Stocks reversed course Wednesday after strong gains the previous day.

The iShares iBoxx High Yield Corporate Bond ETF slipped 29 cents, or 0.39%, to $73.23.

“The last few days, the market had been better,” a source said. “There might be some renewed interest in recent new issues.”

Ford Motor Co.’s recent 6.1% senior green notes due 2032 (Ba2/BB+) turned weaker Wednesday, trading down nearly 1¼ points in strong junk market interest.

“They were definitely active today,” one source said.

The issue was quoted last trading weaker Wednesday at 91¼, 91½ after gaining Monday and Tuesday in strong secondary action.

Royal Caribbean Group’s new 9¼% senior notes due 2029 (B3/B+) improved modestly in thin secondary action Wednesday after climbing 1 1/8 points Tuesday.

Carnival Corp.’s notes were much more active over the day, another source said.

Carnival’s paper fell about ½ point to more than 1 point in heavy secondary supply. The issuer was among the most active names seen trading Wednesday.

Carnival’s 6% notes due 2029 (B3/B) dipped more than ½ point on $27.75 million of secondary action.

Primary activity

In the primary market, two offerings remain active, with sources from various quarters asserting that both are on track to price before the end of the week, and possibly on Thursday.

The Enerflex Ltd. $625 million offering of five-year senior secured first-lien, second-out notes (B2/BB-/BB-) was heard to be playing to a book that was two-times deal size on Wednesday morning, as the accounts continued to be canvassed, according to a sellside source.

Pending formal price talk initial guidance set out a 9% coupon at a to-be-determined original issue discount, to yield in the context of 12% to 13%.

Meanwhile Chile-based Latam Airlines Group SA appears likely to price its $1.5 billion two-part offering of senior secured notes on Thursday, a portfolio manager said.

Recent pricing discussions have the five-year tranche coming to yield 15%, and the seven-year at 15¼%, a near-tectonic widening from initial guidance in the low 13% area on the five-year notes and the low-to-mid 13% area on the seven-year notes.

The deal, from an emerging markets corporate issuer, is being tracked on both emerging markets and high-yield desks, sources say.

U.S. high-yield accounts that were active in the Latam Airlines debtor-in-possession (DIP) loan comprise a captive audience for the deal, according to market sources.

Ford paper slips

Ford Motor’s 6.1% senior green notes due August 2032 (Ba2/BB+) turned weaker Wednesday after steady gains in the first two sessions of the week, sources said.

The notes were quoted late in the day off nearly 1¼ points at the 91½ bid area on nearly $24 million of secondary action.

The issue bounced back slightly from trading down to 91¼ bid early in the session.

On Tuesday, the issue was quoted about 1 point better in the 92½, 92¾ range after climbing as much as 2 points on Monday.

Ford priced $1.75 billion of the bonds at par in a high-grade style execution on Aug. 16.

Royal Caribbean better

Royal Caribbean’s 9¼% senior notes due January 2029 (B3/B+) were quoted in thin trading Wednesday at 101 1/8, 101 5/8.

“It was not the most active day,” a source said. “They were more active on Tuesday with higher volume.”

The notes on Tuesday rallied 1 1/8 points to 101¼ bid.

Royal Caribbean sold the notes in a $1 billion offering on Sept. 22 at par.

Carnival weakens

Meanwhile, Carnival’s 4% notes due 2028 (Ba3/BB-) dropped more than 1¼ points Wednesday to 81½ bid on $13 million of paper changing hands, a source said.

Carnival’s 6% notes due 2029 (B3/B) also fell more than ½ point to the 68½ bid area on $27.75 million of secondary action.

In addition, the cruise operator’s 7 5/8% notes due 2026 (B3/B) gave back nearly 1 point on the day to trade with a 76 handle on $15.45 million of secondary volume.

Fund flows

High-yield ETFs saw $610 million of daily cash inflows on Tuesday, according to a market source.

However actively managed high-yield funds sustained substantial outflows on the day: negative-$310 million.

The dichotomy might be understood by looking at the actively managed funds as the “real money” faction of high-yield investors, while the ETFs are typically held to represent the faster money, a trader said.

Given that, the actively managed funds, which are structurally more procedural, will be less likely to change directions on a dime, the source added.

Also, as the ETFs react to day-to-day and hour-to-hour fluctuations in the market with near-instant orders to buy or sell, there are high-yield investors continuing to seize opportunities, such as those presented in the big rallies that opened October, to pare their positions, sources say.

The combined high-yield funds are tracking $2.72 billion of net outflows on the week that was set to conclude with Wednesday's close, a market source said.

Indexes

The KDP High Yield Daily index declined to 51.9 and a yield of 7.74%, compared to 52.52 and a yield of 7.65% on Tuesday and 51.84 and a yield of 7.95% on Monday.

The index posted a cumulative loss of 106 points in the previous week.

The CDX High Yield 30 index rose 6 basis points to 97.79 after hitting 97.73 on Tuesday and rising 54 bps Monday to 96.35.

The index posted a cumulative loss of 197 bps over the prior week.

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