The average bid of LCD’s flow-name high-yield bonds nosedived 204 bps in today’s reading, to 98.33% of par, yielding 7.15%, from 100.37, yielding 6.64%, on Oct. 27. All 15 constituents in the sample were in the red.
This is the first below-par reading for the average bid price since Sept. 27. It is also the lowest reading since Sept. 15, when the average bid was recorded at 98.85 ahead of the September meeting of the Federal Open Market Committee. Similarly, today’s drop comes with the FOMC’s November session currently underway, as well as one week ahead of the U.S. presidential election.
Additionally, headlines affecting Community Health Systems and Valeant Pharmaceuticals International also weighed on the sample. Valeant 5.875% notes due 2023 shed five points, to 77.25, as news reports surfaced that U.S. prosecutors are examining the actions of former top executives for possible accounting fraud related to the online pharmacy Philidor Rx Services, which Valeant secretly controlled.
Also, Community Health 6.875% notes due 2022 were 6.25 points lower in today’s reading as the market continues to brace for the company’s quarterly report. The hospital operator said last week it expects a 10% drop in revenue for the three months ended Sept. 30, 2016.
The average bid is now down 286 bps over the past week, 270 bps from two weeks ago, and 283 bps from four weeks ago.
The average yield to worst gained 51 bps, to 7.15% in today’s reading, and the average option-adjusted spread to worst rose 48 bps, at T+553. Both the average yield and spread remain wider when compared to high-yield’s broader market averages. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed on Monday, Oct. 31 with a yield to worst of 6.04% and an option-adjusted spread to worst of T+483. – Staff Reports
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