Morning Commentary: Enova sells $250 million; recent issues mixed; ETFs see big Thursday outflow

By Paul A. Harris

Portland, Ore., Aug. 18 – High-yield bond trading volume was low and name-specific on Friday morning, a bond trader said.

Bonds of Calpine Corp. got an initial boost from news that Energy Capital Partners and a group of investors intend to buy the Houston-based power generator for $5.6 billion in cash.

But interest in the name appeared to fade, the trader said.

The Calpine 5 3/8% notes due Jan. 15, 2023, a $1.25 billion issue, were 96¼ bid, unchanged at mid-morning.

Heaviness persists among some recent issues, the trader said.

The Staples Inc. 8½% senior notes due Sept. 15, 2025 (B3/B-) were down a point on the day at 97 5/8 bid, 98 1/8 offered.

Another trader had them generically at 97½ bid, 98½ offered but had yet to see them trade with a 97-handle.

The market was feeling weak to this trader.

Staples priced the bonds early this week at par in a downsized $1 billion issue, decreased from $1.3 billion after having been earlier decreased from $1.6 billion.

Elsewhere recently minted bonds from Tesla, Inc. were lower on the morning at 97¼ bid, 97¾ offered, according to a trader, who added that they might have gotten as low as 97 bid.

Demand for the deal – which came at par in an upsized $1.8 billion issue (from $1.5 billion) on Aug. 10 – equaled the amount of bonds printed, sources say, adding that there was no room for the Tesla notes to trade higher.

However it's not all bad news among recent issues.

New Trinseo 5 3/8% senior notes due Sept. 1, 2025 (B3/BB-) were 101 5/8 bid, 102 1/8 offered and doing just fine on Friday morning, a trader said.

The deal priced at par earlier in the week in an upsized $500 million issue (from $400 million).

Enova clears calendar

Enova International Inc. cleared the active forward calendar as it priced a $250 million issue of seven-year senior notes (Caa1/B-) at par to yield 8½% early Friday.

The yield printed on top of both price talk and early guidance in the 8½% area.

Jefferies LLC was the active bookrunner.

In the wake of Enova the primary market could be quiet indeed during the run-up to the Labor Day holiday weekend, the traditional summer-fall threshold in the bond market, a trader said.

Outlooks for the post-Labor Day period in the primary market continue to take shape, with some participants seeing an active fall in the works for the primary market.

Big Thursday ETF outflows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, with high-yield ETFs seeing chunky outflows.

The ETFs sustained $408 million of outflows on the day.

Actively managed funds were flat to slightly positive, seeing $5 million of inflows on Thursday.

The news follows a Thursday afternoon report from Lipper US Fund Flows that the dedicated high-yield bond funds sustained $2.19 billion of outflows in the week to Wednesday's close.

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