Thursday, February 12, 2009

Bond Flipping Picks Up In Early 2007 Deja Vu

The credit market is on fire, as is proof that greater fool theory is alive and well. Yesterday saw the placement of 3 high yield issues at a much more reasonable original issue discount, and yet accounts were swarming like flies on excrement with lipstick. All three issues have immediately generated about 1-2 points return post break, leading many original allocators to flip their holdings to naive secondary market bidders. With equities and treasuries both now considered "unreliable" investments, and investment grade trading at October spreads (IG11 at 197 last), it seems HY is the final bubble available to plunk any excess cash, before everything goes to hell.

Summary of yesterday's festivities:

HCA's $310 million 9.875% BB-/B2 second-lien notes due 2017 was placed at 96.67, now bid at 98.5.

Chesapeake Energy's $425 million 9.5% BB/Ba3 notes due 2015 were issued at 97.75, now bid also at 98.5. The bond was upsized by $125 million, bringing the total outstanding in the series to $1.425 million. The original $1 billion was placed in late January at 95.07.)

Forest Oil's $600 million 8.5% BB-/B1 senior notes due 2014 were priced at 95.15, to yield 9.75%, and have since risen to 97 bid post-break. Sphere: Related Content
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