Junk Bonds Rebound After Sharp Selloff
December 15 2015 - 10:00AM
Dow Jones News
Junk bonds traded mostly higher Tuesday, reversing some of the
deep losses seen in recent days as investors fretted over low oil
prices and the closure of a junk-bond fund.
Bonds from Frontier Communications Corp., Ally Financial Inc.
and Energy Transfer Equity LP posted small gains Tuesday, with some
trades about 1 cent on the dollar higher, according to data from
MarketAxess Holdings Inc.
The increase is in line with global markets Tuesday, as
investors look to a decision from the Federal Reserve on raising
benchmark interest rates after its policy meeting this week.
The iShares iBoxx USD High Yield Corporate Bond exchange-traded
fund, the largest junk-bond ETF by assets, was up roughly 1.2% in
premarket trading, to $79.74 a share.
Prices in the junk-bond market have declined steeply in recent
days, as investors worried that prolonged low oil and commodity
prices would push many junk-rated energy and mining firms into
default. Negativity also swept the market after Third Avenue
Management LLC said it would close its $789 million Focused Credit
Fund and that investors may not get their money back for
months.
Through Monday, U.S. junk bonds have returned a negative 5.8% on
the year, a figure that reflects price changes and interest
payments, according to Barclays data. In contrast, the total return
on the S&P 500 stock index is a positive 0.21%, according to
S&P Dow Jones Indices.
Investors will be closely watching debt from Chesapeake Energy
Corp., which set a Tuesday deadline for a debt swap and could
announce its results later in the day.
The company, viewed as a benchmark in the junk-bond energy
sector due to its heavy debt load, is seeking to push out
maturities and lower its overall debt burden with the exchange, but
it remains unclear how many investors will participate. The new
bonds will give investors a stronger claim on the company's assets
in exchange for a principal reduction on their old bonds.
The Wall Street Journal reported Monday that Chesapeake is
working with restructuring advisers at Evercore Partners Inc. Some
Chesapeake bonds fell to 30 cents on the dollar or lower in trading
on Monday.
Brian Gibbons Jr., senior oil and gas analyst at research firm
CreditSights, said investors would be better off exchanging their
bonds, though the outlook is still bleak if energy prices don't
recover.
"This company is going to have to file [for bankruptcy] at some
point or do a major out-of-court restructuring," he said. "This is
just the first step here."
Write to Mike Cherney at mike.cherney@wsj.com
(END) Dow Jones Newswires
December 15, 2015 09:45 ET (14:45 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Frontier Communications (NASDAQ:FTR)
Historical Stock Chart
From Aug 2024 to Sep 2024
Frontier Communications (NASDAQ:FTR)
Historical Stock Chart
From Sep 2023 to Sep 2024