Junk closes busy week quietly; StoneX holds at 101; FirstCash dips; Coinbase adds

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 16 – The junk bond market took a breather on Friday in terms of new deals, ahead of the extended Presidents’ Day holiday weekend.

The Feb. 12 week had $7.75 billion of junk-rated, dollar-denominated issuance, the most modest weekly total in the past three weeks.

The week ahead figures to be at least moderately active, a debt capital markets banker said on Friday.

Meanwhile, it was a heavy open for the secondary space on Friday after the latest Producer Price Index report came in hotter-than-expected.

The macro data reinforced Tuesday’s CPI print and pointed to a worrying trend of inflation creeping higher, a source said.

The data further enforced a higher-for-longer rate environment with market expectations for rate cuts in May or June now in question.

The data, combined with recent retail sales figures which suggested weakness in the economy, could be pointing to what would be a nightmare scenario for the Federal Reserve – an uptick in inflation in a weak economy.

“Another month of strong inflation and weak economic data would be an ominous sign,” a source said.

Next week’s Consumer Price Expenditure report will be closely watched with some pain in store if the Fed’s preferred inflation gauge also comes in hotter-than-expected.

However, the high-yield secondary space was taking Friday’s numbers in stride.

While heavy after the report’s release, the cash bond market quickly bounced back.

There was little available to buy amid the early weakness on Friday morning and the market quickly pared its losses to close the day flat to down 1/8, a source said.

New issues remain the market’s focus and where investors have been putting their money to work.

While the Fed and the latest macro data have challenged the market’s initial expectation of up to six rate cuts in 2024, pricing in the primary market remains tight with higher-quality credits pricing deals on 6-handles.

However, that could very quickly change, a source said.

There has also been greater dispersion in the aftermarket performance of recent deals with some issues skyrocketing on the break while others were lagging their issue prices.

StoneX Group Inc.’s new 7 7/8% senior secured second-lien notes due 2031 (Ba3/BB-) were putting in a strong performance in the aftermarket with the notes holding a 101-handle despite coming in from their heights.

However, FirstCash, Inc.’s 6 7/8% senior notes due 2032 (Ba2/BB) struggled with the notes giving back their gains on the break and briefly dipping underwater before closing the day wrapped around their issue price.

Outside of new and recent issues, earnings-related news continued to spark some movement.

Coinbase Global, Inc.’s senior notes (B1/BB-) were on the rise after the crypto-trading platform reported a large earnings beat.

StoneX strong

StoneX’s 7 7/8% senior secured second-lien notes due 2031 were holding a strong premium despite a soft day for the market on Friday.

While the notes came in from the heights reached on the break, they maintained a 101-handle and were trading in the 101 to 101¼ context throughout the session, a source said.

The notes traded as high as 101 5/8 on the break.

StoneX Group priced a $550 million issue of the 7 7/8% notes at par in a Thursday drive-by.

Yield talk was in the 7 7/8% area.

FirstCash struggles

FirstCash’s 6 7/8% senior notes due 2032 struggled on Friday with the notes dipping below par in intraday activity before clipping losses to close the day wrapped around their issue price.

The 6 7/8% notes traded down to 99¾ bid amid the heaviness early in the session, a source said.

However, they improved as the broader market bounced back with the notes closing the day wrapped around par.

The pawn shop operator had good fundamentals with strong revenue and decent cash flow.

However, it was “kind of a one-off credit,” a source said, with the company from a sector some are wary of.

FirstCash priced a $500 million issue of the 6 7/8% notes at par in a Thursday drive-by.

The yield printed at the tight end of yield talk in the 7% area.

Coinbase rises

Coinbase’s convertible notes were on the rise on Friday after a strong earnings report.

The crypto-currency platform’s 3 3/8% senior notes due 2028 added ½ to ¾ point to close the day on an 84-handle.

The notes were trading on an 81-handle in early February before gaining strength as Bitcoin broke out.

They were wrapped around 84¼ at the market close with the yield about 7½%.

The 3 5/8% senior notes due 2031 added 1 to 1¼ points to close the day on a 77-handle.

The notes were lifted to trade in the 77½ to 77¾ context heading into the close, according to a market source.

The yield was also about 7½%.

The notes have largely traded on a 75-handle since January but gained the previous session heading into earnings.

Indexes

The KDP High Yield Daily index fell 13 basis points to close Friday at 50.4 with the yield now 6.95%.

The index added 9 bps on Thursday and 13 bps on Wednesday, fell 38 bps on Tuesday and inched up 2 bps on Monday.

The index was down 27 bps on the week.

The ICE BofAML US High Yield index was off 13.9 bps with the year-to-date return now negative 0.199%.

The index added 19.1 bps on Thursday, 11.3 bps on Wednesday, fell 58.9 bps on Tuesday and added 4.3 bps on Monday.

The index was down 38.1 bps on the week.

The CDX High Yield 30 index was down 19 bps to close Friday at 106.06.

The index gained 34 bps on Thursday, 16 bps on Wednesday, sank 40 bps on Tuesday and added 11 bps on Monday.

The index closed the week up 2 bps.

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