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North American Bond Research – September 11, 2020

Posted on September 11, 2020
HIGH YIELD BOND RESEARCH
September 11, 2020
Bond Markets

BUXX DOLLAR INDEX FELL 11 CENTS TO 88.37 AS THE DOLLAR WEAKENED AGAINST THE EURO. GLOBAL MARKETS WERE MIXED AS VOLATILE TECH FELL. 10 Year Treasury notes were down 1.6 bps. S&P +0.05%, Dow +0.48%, NASDAQ -0.60%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 28.6 MILLION+ CASES AND 918000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.63 MILLION+ CASES AND 198000+ DEATHS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028 made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   NuStar Logistics LP 5.75% 10/1/2025 +0.4%
  Pacific Gas & Electric Co. 4% 12/1/2046 +0.1%
  United Rentals North AM 3.875% 2/15/2031 +0.2%
  NuStar Logistics LP 6.375% 10/1/2030 +0.5%
  Petrobras Global Finance BV 7.375% 1/17/2027 +1.3%
–   PDC Energy Inc. 5.75% 5/15/2026 -2.5%
  Sprint Corp. 7.125% 6/15/2024 -0.2%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.0%
  TreeHouse Foods Inc. 4% 9/1/2028 -0.2%
  Broadcom LTD 4.3% 11/15/2032 -0.1%
NuStar Logistics LP   5.75% 10/1/2025
Pacific Gas & Electric Co.   4% 12/1/2046
United Rentals North AM   3.875% 2/15/2031
NuStar Logistics LP   6.375% 10/1/2030
PDC Energy Inc.   5.75% 5/15/2026
Sprint Corp.   7.125% 6/15/2024
Petrobras Global Finance BV   7.375% 1/17/2027
T-Mobile USA Inc.   3.875% 4/15/2030 144A
TreeHouse Foods Inc.   4% 9/1/2028
Broadcom LTD   4.3% 11/15/2032
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.07% -0.29% 0.39% 3.70% 5.42% 8.56%
Mining -0.34% -1.64% 0.86% 3.47% -10.28% -6.53%
Construction 0.08% -0.26% 0.69% 5.03% 4.42% 6.95%
Manufacturing -0.00% -0.45% -0.23% 3.34% 2.10% 6.15%
Transportion, Communication, Electric/Gas -0.02% -0.55% -0.20% 2.43% 3.78% 6.05%
Wholesale -0.04% -0.46% -1.26% 1.98% 1.49% 4.53%
Retail 0.03% -0.27% 1.05% 4.28% 2.50% 5.46%
Finance, Insurance, Real-Estate 0.01% -0.37% 0.88% 4.01% 1.86% 4.46%
Services -0.02% -0.37% 0.93% 3.01% 3.52% 4.82%
Public Administration 0.11% 0.54% 1.44% 6.64% 7.29% 10.19%
Energy -0.32% -1.54% 0.86% 3.01% -8.68% -5.11%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Nielsen Finance LLC (USD) 5.625% 10/1/2028 144A (09/10/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.63%.

2. Nielsen Finance LLC (USD) 5.875% 10/1/2030 144A (09/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.88%.

3. Embraer Netherlands B.V. (USD) 6.95% 1/18/2028 144A (09/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.73, Yielding 7%.

4. Borets Finance LTD (USD) 6% 9/17/2026 144A (09/10/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.

5. Cornerstone Building Brands Inc. (USD) 6.125% 1/15/2029 144A (09/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.13%.

6. Vmed O2 Uk Financing I PLC (USD) 4.25% 1/31/2031 144A (09/10/2020): 1350MM Secured Notes.

7. Borets Finance LTD (USD) 6% 9/17/2026 Reg S (09/10/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.

8. Cornerstone Building Brands Inc. (USD) 6.125% 1/15/2029 Reg S (09/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.13%.

9. Vmed O2 Uk Financing I PLC (USD) 4.25% 1/31/2031 Reg S (09/10/2020): 1350MM Secured Notes.

10. Switch LTD (USD) 3.75% 9/15/2028 Reg S (09/10/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

1. MAG Aerospace: $290.7MM TL (B3/B)

2. RCN Grande: $1.19B TLB

3. Cablevision Lightpath: $600MM TL (B1/B+)

4. CJ Foods Inc.: $285MM TLB

5. Avianca : $1.3B DIP DD TLB

6. Shearer’s Foods LLC: $1.325B TLs: $985MM TL (B1/B-); $340MM TL (Caa1/CCC)

7. RCN Grande: $1.19B TLB

8. MAG Aerospace: $290.7MM TL (B3/B)

9. CJ Foods Inc.: $285MM TLB

10. Avianca : $1.3B DIP DD TLB

Additional Commentary

NEW ISSUANCE WATCH: Nielsen Finance LLC  issued 750MM in notes
Top Widening Loans Top Narrowing Loans
Revere Power LLC (USD) RC 03/29/2024
Casper Bidco (EUR) TL E+850 07/30/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Petco Animal Supplies Inc. (USD) TLB1 L+325 01/26/2023
Laird PLC (USD) TL L+450 05/04/2025
Jazz Securities LTD (USD) TLA 06/07/2023
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Tacala LLC (USD) TLB L+350 02/05/2027
Socotec SA (EUR) TLB E+400 07/27/2024
Pitney Bowes Inc. (USD) TLA L+175 11/01/2024

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 14 bp (basis points), as of 09/11/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 11, 2020
Bond Markets

MARKETS GO DOWN AS US REPORTED STUBBORNLY HIGH FIRST TIME UNEMPLOYMENT CLAIMS OF 857K. THE RECOVERY IS LOOKING TO BE LONG AND SLOW. ON THE VACCINE FRONT THE OXFORD TRIAL HAD TO BE PUT ON HOLD DUE TO TOXIC REACTION TO THE VACCINE. THE BUXX DOLLAR INDEX ROSE TO 88.49.  10 Year Treasury notes were down 1.8 bps. S&P -1.76%, Dow -1.45%, NASDAQ -1.99%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 28 MILLION+ CASES AND 906000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.55 MILLION+ CASES AND 195000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Halliburton Co. (USD) 5% 11/15/2045 made analysts’ ‘Conviction Buy’ list. (See the chart below for Halliburton Co.  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Apple Inc. 2.55% 8/20/2060 +0.2%
  Dollar Tree Stores Inc. 3.7% 5/15/2023 +0.0%
  Citigroup Inc. 3.106% 4/8/2026 +0.1%
  Oracle Corp. 3.6% 4/1/2050 +1.2%
  Alphabet Inc. 2.25% 8/15/2060 +1.1%
–   Valero Energy Corp. 2.85% 4/15/2025 -0.1%
  Shell Intl Finance BV 2.75% 4/6/2030 -0.2%
  Verizon Communications Inc. 4.522% 9/15/2048 -0.0%
  CVS Health Corp. 1.75% 8/21/2030 -0.0%
  Shell Intl Finance BV 3.25% 4/6/2050 -0.6%
Valero Energy Corp.   2.85% 4/15/2025
Shell Intl Finance BV   2.75% 4/6/2030
Verizon Communications Inc.   4.522% 9/15/2048
Apple Inc.   2.55% 8/20/2060
Dollar Tree Stores Inc.   3.7% 5/15/2023
CVS Health Corp.   1.75% 8/21/2030
Citigroup Inc.   3.106% 4/8/2026
Oracle Corp.   3.6% 4/1/2050
Alphabet Inc.   2.25% 8/15/2060
Molson Coors Brewing Co.   2.1% 7/15/2021
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.05% -0.51% -0.94% 3.16% 5.52% 6.54%
Construction -0.21% -0.52% -1.31% 3.13% 5.11% 5.96%
Manufacturing 0.05% -0.36% -1.21% 2.86% 7.17% 8.12%
Transportion, Communication, Electric/Gas -0.03% -0.48% -1.85% 3.30% 8.52% 9.30%
Wholesale -0.00% -0.36% -0.56% 3.34% 6.79% 9.14%
Retail 0.08% -0.51% -1.81% 2.24% 8.04% 9.57%
Finance, Insurance, Real-Estate 0.01% -0.21% -0.49% 2.55% 6.11% 7.25%
Services 0.00% -0.37% -0.90% 3.12% 6.69% 7.58%
Public Administration 0.23% 0.22% 0.26% 0.75% 4.82% 4.46%
Energy -0.06% -0.57% -1.10% 2.56% 4.65% 6.07%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. O’Reilly Automotive Inc. (USD) 1.75% 3/15/2031 (09/09/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.544, Yielding 1.8%.

2. Schlumberger Finance Canada (USD) 1.4% 9/17/2025 (09/09/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.88, Yielding 1.42%.

3. DNB Bank ASA (USD) 1.127% 9/16/2026 144A (09/09/2020): 1000MM Senior Non Preferred Notes, Price at Issuance 100, Yielding 1.13%.

4. Life Storage Inc. (USD) 2.2% 10/15/2030 (09/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.524, Yielding 2.25%.

5. Duke Energy Corp. (USD) 0.9% 9/15/2025 (09/09/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.951, Yielding .91%.

6. Fresenius Medical Care US Finance Inc. (USD) 2.375% 2/16/2031 144A (09/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.699, Yielding 2.41%.

7. Fresenius Medical Care US Finance Inc. (USD) 2.375% 2/16/2031 Reg S (09/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.699, Yielding 2.41%.

8. Masco Corp. (USD) 2% 10/1/2030 (09/09/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.927, Yielding 2.01%.

9. Toronto-Dominion Bank (USD) 0.45% 9/11/2023 (09/09/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.857, Yielding .5%.

10. JPMorgan Chase & Co. (USD) VAR% 9/16/2024 (09/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH:  O’Reilly Automotive Inc. issued 500MM in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
United Site Services Inc (USD) TL2 L+775 08/25/2025
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Jazz Securities LTD (USD) TLA 06/07/2023
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Valeo Foods Group LTD (EUR) TLB E+450 08/27/2027
WestJet Airlines LTD (USD) TL L+300 12/11/2026
Tacala LLC (USD) TLB L+350 02/05/2027
DigiCert Inc. (USD) TL2 10/16/2027

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 14 bp (basis points), as of 09/10/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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