News Digest: Are high-yield bonds back in favor?
November 7, 2022
Amidst early signs of inflation cooling off, US Treasury yields tumbled last week causing risk appetite to surge. At least two cash-strapped corporate borrowers slipped through the high-yield new issue pipeline in the second week of November, placing deals ahead of the announcement around the consumer price index that came a day later.
Yahoo Finance reports this resurgent risk appetite lifted Ball Corp’s new 6.875% 5.5-year senior notes to highs of 101.5, after oscillating on either side of the par pricing. S&P Global Ratings deemed the BB+ / Ba1 deal to be neutral to the company’s leverage amidst concerns about the free cash flow over the final months of 2022.
The company narrowly missed Wall Street earnings expectations with its Q3 numbers, which it attributed to a 20% drop in revenue on an unfavorable currency impact, higher costs and lower-than-expected demand for aluminum packaging. What was interesting though is Ball Corp bonds fell 1.625 points after the report, but recouped half of it in subsequent sessions.