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High Yield Bond Research – April 11, 2019

Posted on April 11, 2019
TREASURY YIELDS ROSE ON THURSDAY upon the release of positive economic data on the labor market calming fears of a slowing economy, 10-year Treasury note increased 3.4 basis points.  Equities settled lower as investors anticipate a lackluster quarterly earnings season set to kick off this Friday.  Chief equity strategist Terry Sandven at U.S. Bank Wealth Management sees opportunity, “Expectations for first-quarter results have been ratcheted down on the heels of sluggish global growth, so the bar is low and it could set the stage for upside surprises”S&P -0.11%, DOW -0.19%, NASDAQ -0.31%
INITIAL JOBLESS CLAIMS HIT NEARLY a 50 year low last week falling by 8,000 indicating the labor market remains resilient despite soft economic data; claims fell below 200,000 for the first time since 1969.   U.S. producer prices increased 0.6 percent in March surpassing estimates of 0.3 percent further alleviating fears of a recession.  Guggenheim provides assurance the next recession will be mild compared to previous recent recessions, “Our work shows that when recessions hit, the severity of the downturn has a relatively minor impact on the magnitude of the associated bear market in stocks”. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds.  High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded,  HCA Inc. (USD) 5.875% 3/15/2022 made analysts’ ‘Conviction Buy’ lists. (See the chart for HCA Inc. bonds below.) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Clear Channel Worldwide Hldg Inc. 9.25% 2/15/2024 144A + 1.2%
  Rackspace Hosting Inc. 8.625% 11/15/2024 144A + 0.9%
–   Navios Maritime Acquisition Corp. 8.125% 11/15/2021 144A -0.8%
Numericable-SFR SA   7.375% 5/1/2026 144A
Altice SA   7.625% 2/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.22% 0.06% 2.63% 6.74% 8.54% 7.23%
Mining 0.11% 0.41% 2.55% 4.20% 8.73% 3.15%
Construction 0.13% 0.41% 2.32% 5.15% 7.55% 5.16%
Manufacturing 0.10% 0.32% 1.97% 4.80% 7.12% 5.95%
Transportion, Communication, Electric/Gas 0.08% 0.36% 2.16% 4.89% 6.97% 6.21%
Wholesale 0.10% 0.27% 1.49% 5.03% 7.32% 4.41%
Retail 0.09% 0.51% 1.99% 5.60% 8.66% 4.42%
Finance, Insurance, Real-Estate 0.15% 0.42% 1.85% 4.78% 7.17% 6.04%
Services 0.10% 0.40% 1.83% 4.85% 7.55% 6.73%
Public Administration -0.09% 0.12% 0.74% 3.52% 6.04% 10.46%
Energy 0.12% 0.37% 2.42% 4.33% 8.43% 3.11%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-04-12T084813.350

New Issues Forward Calendar


(None Current 04/11/2019)


1. E.W. Scripps: $1.85B term loans and unsecured debt, Expected Q1 2019

2. Starwood Property Trust Inc: $300M senior notes, Expected Q1 2019

Additional Commentary

NEW ISSUANCE WATCH: on 4/09/19 participants welcome a $750MM new corporate-bond offering by
Golden Entertainment Inc.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/5/19, with a net inflow of $2.0B, year-to-date $12.0B flowed into high-yield.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed (92)

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

  • Six Flags Inc., MW Industries Inc., Ultimate Software Group, Crossamerica Partners LP

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 19 bp (basis points), as of 04/11/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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