Morning Commentary: High-yield secondary firms; Brightline East notes dragged lower

By Abigail W. Adams

Portland, Me., April 26 – The domestic high-yield primary market was dormant on Friday with the calendar empty as the stampede of issuance in early to mid-April continued to dwindle.

While the primary market operated at a steady pace over the past week with $3.24 billion pricing in five dollar-denominated tranches, the past week was one of the lighter volume weeks of the year with the market averaging between $6 billion to $8 billion in weekly issuance, according to Prospect News data.

The active pace of issuance is expected to continue in the week ahead although the Federal Open Market Committee meeting may put a drag on dealmaking in the early part of the week, sources said.

The Fed meeting will be closely monitored as the market attempts to assess how the Fed will respond to the latest round of macro data.

The market narrative around rate cuts has shifted dramatically over the past two weeks with the question turning from how many rate cuts and when to if there will be rate cuts in 2024.

While the GDP print on Thursday sparked some knee-jerk selling in the market early in the session, it saw a strong rebound into the close.

The secondary space continued to firm early Friday after the release of the Consumer Price Expenditure report.

While the report came in above expectations on an annual basis, the monthly increase of 0.3% was largely in line with expectations.

Markets were breathing a sigh of relief with the cash bond market adding 1/8 to ¼ point to nearly eliminate losses from the previous session, a source said.

Even as the broader market firmed, Brightline East LLC’s 11% senior secured notes due Jan. 31, 2030 (B/B) continued to struggle in aftermarket activity.

The notes were dragged down another ¼ to ½ point after a weak break.

They were trading in the 99 to 99½ context in early trade, a source said.

The notes closed the previous session at 99½ bid.

Brightline priced a $1.325 billion issue of the 11% senior secured notes at par on Thursday.

Pricing came at the wide end of price talk for a yield of 10¾% to 11%.

While the notes offered a chunky coupon, the deal must have had some hair on it, a source said.

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