Yield Curve Flat, Movie Theaters Lose

Interest rate fears and a flat, almost inverted yield curve on the 10-year Treasury helped keep the secondary fairly uneventful last week. And most of the specific stories floating around seemed to cause losses more than gains.

The 10-year Treasury was yielding about 673 basis points as of last Thursday, compared to 672 for the long bond. And, as several traders noted last week, an inverted yield curve is usually a sign of bad economic times on the horizon. And stoking that sentiment were fears that the Fed will raise interest rates not just once but several times this year.

As far as the specific trading went last week, movie theaters took it on the chin, resulting from too much capacity and not enough good movies to fill the seats. As reported last fall, several of the issuers are going through restructuring (HYR 10/18/99).

United Artists Theatre Circuits, which last year was said to be struggling with cash flow problems, watched its 9.75% senior subordinated notes fall four points last week to trade at 15 cents on the dollar. Last year, market observers said that at some point after the first quarter this year, it likely will be looking for an acquirer (HYR 10/25/99).

AMC Entertainment lost four points to trade at 80 on its 9.5% senior subordinated notes last week, according to market sources. And Loews Cineplex lost five points on its 8.875% notes of '08 last week to trade at 80. At the beginning of the month, those notes were at 89. Regal Cinemas lost four points last week to trade at 70 on its 9.5% senior subordinated issue due in 2008. That issue began the month at 79, traders said.

There were a few names that saw increases last week.

Chiquita Brands International Inc. bounced back somewhat after a disappointing few weeks. Those bonds traded up about four points to trade at 78, but at least one trader chalked it up to the investors who had punished the name too much initially.

Arch Communications traded up about four points on its zero/10.875% notes to trade at 50 after some merger rumors emerged last week, traders said, although specifics on those rumors were not available.