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Bond Market News
Carnival and Royal Caribbean’s Bonds Top US Junk Bond Performance YTD
August 18, 2023
The strong recovery in leisure and travel has led to a strong rally in cruise operators’ bonds. The leading players, Carnival and Royal Caribbean, have seen their bonds emerge as the top performers within the US junk bond space this year. Carnival’s 5.75% 2027s for instance have rallied 25% YTD, from lows of 74 cents at the start of the year to currently trade at 92.75 cents on the dollar, yielding 8.16%. Similarly, Royal Caribbean’s 5.375% 2027s have rallied 16% YTD to currently trade at 94.5, yielding 7%. In comparison, the average YTD return on US junk bonds is 6.2%. Carnival Chief Financial Officer David Bernstein said in an interview, “People view us and say, ‘Oh there is not as much risk…With the lower level of risk and the higher level of performance, their view of us paying back the bonds improves.” Cruise operators’ bonds have attracted institutional asset managers including PIMCO and Neuberger Berman Group. Sonali Pier, a high-yield and multi-sector credit portfolio manager at PIMCO said, “Services are still pretty strong. The consumer is healthy and unemployment is low. There are still some tailwinds.”
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