The high-yield market was on fire last week as of Thursday's close, particularly Wednesday and Thursday. Rallies came in a wide range of sectors, and traders saw a great deal of short covering. Here is selected action.
Charter Bounces Back After Downgrade
Charter Communications' 8.625% notes of '09 (B2/B-) dropped early in the week after a two-notch downgrade from Standard & Poor's, but had rallied by Thursday's close to a 62 bid, up from 60.5 the previous Friday.
Aryeh Bourkoff, the 70% of all the CDO downgrades. "The poor economic environment, the high default rate and the lower recovery rates are the key drivers," says Patrick Gonzalez, managing director with the CDO group of financial guarantor XL Capital Assurance, about high-y-yugh the next few months, the bonds can rebound nicely and strongly," he says. Bourkoff is positive on the cable sector long-term, and argues that buying Charter is a "high-octane way to play the sector."
Gaming Sector Widening Seen As Unlikely To Hold
The stalwart gaming sector continued to see some slight weakness. By mid-Thursday, the Aztar Corp. 9% notes of '11 (Ba3/B+) were trading at 530 basis points over Treasuries, after going out the previous week at 446 over the curve. The Isle of Capri 9.3% notes of '12 (B2/B) were unchanged at 510 over the curve in spite of the overall high-yield rally.
One sell-side gaming analyst believes the spread widening is attributable to weakness in Treasuries and light trading volumes. He argues that wider bids are not indicative of actual trading prices.
Towers, Wireless, Among High-Yield's
Biggest Gainers
The biggest beneficiaries of last week's rally may have been telecommunications towers and wireless carriers. Among the towers, American Tower 9.375% notes of '090.*0*0FCÄ0b5JUÌUÕUÆ'O% notes of '11 (B3/B) were up from 56 to 64.5. On the wireless side, Nextel Communications' 9.375% notes of '09 (B3/B) were up from 68 to 73