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North American Bond Research – February 13, 2020

Posted on February 13, 2020
HIGH YIELD BOND RESEARCH
February 13, 2020
Bond Markets

MARKETS AGAIN JUMP TO RECORD HIGHS AS CHINA’S SENIOR MEDICAL ADVISORS SUGGESTS CORONAVIRUS WILL BE DONE BY APRIL!    S&P 10 year Treasury notes were down 4.0 basis points.  S&P +0.65%, Dow +0.94%, NASDAQ +0.91%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 45000+ CASES AND 1100+ DEATHS. INFECTION HAS SPREAD TO OVER 25 COUNTRIES WITH 1100+ CONFIRMED CASES, 5000+ STUCK ON CRUISE SHIPS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.125% 11/15/2023 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Communications Sales & Leasing Inc. 8.25% 10/15/2023 + 0.1%
  Charter Communications Operating LLC 4.8% 3/1/2050 + 0.4%
  BAC Cap Trust X 5.63% 3/15/2043 + 2.5%
–   Deutsche Bank AG 6% PERP -0.1%
  HCA Inc. 3.5% 9/1/2030 -0.1%
  Sprint Capital Corp. 6.875% 11/15/2028 -0.4%
Deutsche Bank AG   6% PERP
Communications Sales & Leasing Inc.   8.25% 10/15/2023
HCA Inc.   3.5% 9/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.06% 0.52% 0.69% 2.98% 1.48% 17.65%
Mining 0.07% -0.16% -2.97% 1.76% -2.48% 2.24%
Construction 0.02% 0.48% 1.75% 3.26% 1.81% 13.23%
Manufacturing 0.00% 0.41% 0.79% 3.25% 1.29% 11.46%
Transportion, Communication, Electric/Gas 0.02% 0.94% 1.25% 3.66% 1.77% 12.38%
Wholesale 0.01% 0.18% 0.62% 3.36% 1.32% 10.40%
Retail -0.01% 0.61% 0.85% 3.49% 1.37% 12.64%
Finance, Insurance, Real-Estate -0.01% 0.40% 0.95% 3.15% 1.51% 11.80%
Services 0.00% 0.46% 0.82% 3.08% 1.25% 10.77%
Public Administration -0.08% 0.61% 1.12% 3.68% 1.74% 14.90%
Energy 0.04% -0.01% -2.25% 2.51% -1.59% 4.03%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. RED Oak Capital Fund IV, LLC (USD) 9% 6/30/2026 (02/12/2020): 50MM Secured Notes, Price at Issuance 100, Yielding 9%.

2. HCA Inc. (USD) 3.5% 9/1/2030 (02/12/2020): 2700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.5%.

3. Hopson Capital Intl. Group Co. LTD (USD) 6% 2/17/2021 (02/12/2020): 500MM Senior Unsecured Notes.

4. Deutsche Bank AG (USD) 6% PERP (02/12/2020): 1250MM Junior Subordinated Notes, Price at Issuance 100.028.

5. Hecla Mining Co. (USD) 7.25% 2/12/2028 (02/13/2020): 475MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%.

1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

3. Diamondback Energy Inc.: High-yield notes, Expected Q4 2019

4. DDM Holding AG: ¬100MM, Expected Q4 2019

5. Presidio Inc.: $1.775B high yield bonds, Expected 4th Quarter 2019

6. Alpha Auto Group: $225MM notes, Expected 4th Quarter 2019

Additional Commentary

NEW ISSUANCE WATCH: on 02/03/2020 participants welcome a $300MM new corporate-bond offering by
Castle US Holdings.  The most recent data showed money flowed in of ETF/mutual funds for the week ended 01/10/2020, with a net inflow of $9.8 billion.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Weatherford International LTD (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD CR14)
Ghana, Republic of (5Y Sen USD CR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • Symantec Corp., Broadcom LTD, Toll Brothers Inc., Cole-Parmer Instrument Co.

OVERALL CREDIT MARKET:

Long-term bond yields are expected to hit a cyclical peak in 2019 given tight fiscal policy and lagging global economies. Europe remains checked by stubbornly low inflationary forces.  Positive effects remained in force:

  • TED spread held below 13 bp (basis points), as of 02/13/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

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