A Few Reasons To Break Out Your Horns

Admit it, you woke up feeling a bit bullish this morning. Maybe in your off time you hang with Goldilocks, or maybe the latest bits of good news have yet to convince you that we're "out of the woods," as they say. But despite your bearish nature, you have to admit that, lately, you've had a hankering to lower your horns and gore something. In a good way.

Let me tell you how I know.

The high yield bond market has been gaining steam over the last few weeks. And the Merrill Lynch U.S. High Yield Master II Index continued to climb last week, after inching into positive territory in late April for the first time this year. By Thursday's opening, the index had gained an additional 3.617 points over the previous week's close to start the day at 596.707.

On the primary market, Ford priced a $1.1 billion high yield bond issuance last Monday, the first to top the billion-dollar mark since Energy Future Holdings (TXU) priced $3.75 billion in new bonds last November (see Market Buzz, page 3). And while we certainly have nothing against deals under $1 billion-issues from the likes of Berry Plastics, MarkWest Energy and Macrovision that have kept the high yield loan and bond markets plugging along-a deal with a little more girth seems an indication of the market's improving health.

And speaking of bulky deals, underwriters for Dutch oil refiner LyondellBasell Industries begin road-showing a $7.5 billion term loan B this week, another "first of its size to hit the market in a while" deal. It also marks the chiseling away of more of the hung debt in the loan pipeline (which, as I mentioned last week, has now dropped to just over $90 billion). And this deal's getting done in a good old-fashioned syndication. Imagine that.

One of the drivers leading to improved investor sentiment, which is partly responsible for the positive events I've noted above, is the strong or better-than-expected first-quarter earnings of quite a number of high yield companies. Among them: Dean Foods, Amkor Technologies, TRW Automotive, Owens-Illinois, United Rentals, SPX Corp., Lear and L-3 Communications.

Now certainly if you looked hard enough, you could find just as many reasons for an extended winter hibernation. But why not, at least for now, take a little run with the bulls. You know you want to.

(c) 2008 High Yield Report and SourceMedia, Inc. All Rights Reserved.

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