Carvana, Coinbase junk bonds fall on Wednesday as layoffs and losses hit prices

Layoffs and losses in a tight job market?

Debt Instruments issued by Carvana Co. CVNA,
and Coinbase Global Inc. COIN,
tumbled in the U.S. high yield market on Wednesday after both companies described setbacks following a pandemic boom.

The slide comes a day after Carvana, an online auto dealership known for its auto vending machines, announced it would lay off about 2,500 workers, or about 15% of its workforce, weeks after posting a $506 million loss in the first quarter had reported.

The layoffs come a week after Federal Reserve Chair Jerome Powell pointed to a historically tight job market as the central bank seeks to secure a soft landing for the economy by cooling inflation without triggering a recession.

Carvana was the most actively traded bond in the U.S. “junk bond” market on Wednesday, after outlining its plans for redundancies, followed by Bausch Health Americas Inc. BHC,
and Coinbase, according to BondCliq data.

The largest trading saw Carvana’s CCC-rated 10.25% coupon bonds maturing in May 2030, with prices falling to $84.94 from around $99 a week ago. Bond prices move in the opposite direction as yields.

Coinbase reported gains on Tuesday, announcing it turned loss and down 2.2 million crypto traders as Bitcoin BTCUSD prices,
Ethereum ETHUSD,
and other crypto assets plunged from last year’s highs.

Its longest BB+ rated bonds, maturing in October 2031, with a coupon of 3.625%, fetched prices of $66 on Wednesday compared to $75.50 the week before.

Fixed income investors have had a brutal start to 2022, driven by interest rate volatility linked to the Federal Reserve’s efforts to stem high inflation by raising interest rates and trimming its nearly $9 trillion balance sheet.

Returns in the ICE BofA US Corporate Index were ldetected at 7.4%up from pandemic lows near 4%, sparking record debt boom.

Shares of Carvana are down about 87.1% year-to-date on Wednesday, while Coinbase is down 78.7%, according to FactSet. Coinbase declined to comment. A request for comment to Carvana was not immediately answered. Carvana, Coinbase junk bonds fall on Wednesday as layoffs and losses hit prices

Brian Lowry

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