The recent influx of new cash caused the higher-rated issues to trade higher last week, according to some traders. Others say the market merely trod water, though it clearly outperformed equities. Jefferson Smurfit priced a $700 million deal--the most sizeable new junk issue in several weeks. Here is selected action.
Nextel Shoots Higher After Affirming Numbers
Nextel Communications' 9.375% notes of '09 (B3/B) jumped from 74 to 81 after the company re-affirmed its subscriber and earnings targets for the fiscal year. Joe Galzerano, telecommunications analyst at CIBC World Markets, says Nextel has done a fantastic job and will likely exceed its EBITDA projections. "This is moving toward a par bond," he says.
Charles Ullerich, portfolio manager at ABN Amro Asset Management in Chicago, says he is impressed with the wireless carrier's ability to continue to add users from within its current client base. He believes the bonds are worth more than 80, and ABN will continue to buy and sell the name actively to take advantage of what Ullerich believes will be continuing volatility.
HealthSouth Feels The Pain
HealthSouth's 7.63% notes of '12 (Ba1/BBB-) fell from 79 to 73. Negative news has swirled around the company since Richard Scrushy, the chairman of the hospital chain, was found to have sold stock just before it disclosed regulatory problems. A trader says arbitrageurs broke away from the bonds as the stock plummeted.
Tesoro Drops As Refining Margins Narrow
Tesoro Petroleum's 9.625% notes of '12 (B2/B+) fell from 64 to 59. A trader says the oil refiner's margins are getting hurt because the price of crude oil is climbing as heating oil and gas continue to trend lower. He expects to see similar pressure on the bonds of other refiners such as Frontier Oil and Giant Industries, but they were unchanged last week.