The high-yield market appears to have peaked, with prices dropping again last week, for the third consecutive week. Last week's selling was fueled by the digestion of triple-C issues in the primary market and a continuing hangover from theFederal Reserve's decision at the end of January to reverse its bias on interest rates, making it more likely the central bank will hike sooner rather than later. Here were notable movers.
Supermarket Heads South
Winn-Dixie Inc., the Southern supermarket chain, saw its 878% notes of '08 drop from 101 two weeks ago to 83.5 by the middle of last week. Jerry Hirschberg, analyst at Standard and Poor's, says the bonds dropped because of several factors, including poor sales and earnings. Other issues such as tough competition from supermarket chains including Wal-Mart Stores and Winn-Dixie's plans to restructure have also contributed to a weaker credit profile. As a result, S&P recently lowered the company's rating from double-B to single-B and put it on credit watch for a possible further downgrade.
Calpine Securities Dim
Power company Calpine Corp.'s 8 1/2% notes of '11 dropped up to six points to 77 in the absence of any company-specific credit news other than its plans to enter the primary market. Calpine said last week it intends to sell $2.3 billion in new bonds to finance the repayment of a bank loan due in November. One trader attributed the drop to this announcement and speculated that some investors may have been lightening up on some of their Calpine holdings to make room for the new deal.
New Qwest Notes Dip
Qwest Communications' new notes, the 714% of '11 and 712% of '14 (B3/CCC+) each fell a couple points last week, shortly after they were priced at end of January. The 7 1/2% notes were quoted at a bid price of 95.5 cents late Thursday. One investor attributed the move to broader weakness in the market and another mused that the widening was because the deal was priced too tightly.