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High Yield Bond Research – April 17, 2019

Posted on April 17, 2019
JUNK BONDS SLIGHTLY EDGED OUT INVESTMENT-GRADE DEBT in net prices linked to actual trades.  Equities slip as healthcare stocks took a significant hit on Wednesday amid the developing political environment surrounding healthcare.  UnitedHealth plummeted 7 percent in the past two days alone despite an earnings beat on Tuesday.  10-year Treasury note rose 0.2 basis points S&P -0.19%, DOW +0.06%, NASDAQ -0.05%
U.S. TRADE DEFICIT CONTRACTS TO AN EIGHT MONTH LOW in February as imports from China narrowed 3.4 percent.  Economist suspect a trade deficit will remain high, “Even if trade negotiations are resolved in such a way as to reduce the bilateral trade deficit with China…[it] would likely divert trade flows to other countries”.  The labor market remains strong, “Wages grew moderately in most districts for both skilled and unskilled workers, with only three reporting slight growth in workers’ pay”.  Pinterest is targeting an IPO price of $19 a share and will begin trading on Thursday $2 above the high end of the range. 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,  Albertsons Inc. (USD) 7.45% 8/1/2029 made analysts’ ‘Conviction Buy’ lists. (See the chart for  Albertsons Inc. bonds below.) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Sprint Nextel Corp. 6% 11/15/2022 + 1.3%
  General Motors Financial Co. Inc. 3.7% 11/24/2020 + 0.5%
–   HCA Inc. 5.625% 9/1/2028 -0.3%
Sprint Nextel Corp.   7.875% 9/15/2023
HCA Inc.   5.5% 6/15/2047
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.07% 0.34% 1.93% 5.13% 7.49% 5.47%
Mining 0.01% 0.93% 2.98% 4.61% 9.64% 3.74%
Construction 0.11% 0.62% 2.21% 5.41% 8.10% 5.25%
Manufacturing 0.07% 0.50% 1.62% 4.91% 7.68% 5.81%
Transportion, Communication, Electric/Gas 0.05% 0.68% 1.93% 5.65% 7.51% 6.27%
Wholesale 0.12% 0.41% 1.47% 4.60% 7.64% 3.99%
Retail 0.10% 0.75% 2.46% 6.75% 10.08% 6.33%
Finance, Insurance, Real-Estate 0.01% 0.35% 1.37% 4.44% 7.29% 5.92%
Services 0.01% 0.45% 1.56% 4.49% 7.64% 6.60%
Public Administration 0.12% -0.43% 0.18% 2.95% 5.68% 9.67%
Energy -0.03% 1.10% 2.91% 4.96% 9.40% 3.08%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-04-17T171242.761

New Issues Forward Calendar
1. Co-operative Bank PLC (GBP) 9.5% 4/25/2029 (04/17/2019):200MM Subordinated Notes.

2. Vizient Inc. (USD) 6.25% 5/15/2027 144A (04/17/2019): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

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

2. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q1 2019

Additional Commentary

NEW ISSUANCE WATCH: on 4/17/19 participants welcome a $300MM new corporate-bond offering by
Vizient Inc.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/12/19, with a net inflow of $0.655B, year-to-date $13.3B 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)
SuperValu Inc. (5Y Sen USD XR14)
San Miguel Corp. (5Y Sen USD CR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

  • Project Maple II BV, Trade Me Group LTD, Jane Street, Six Flags Inc., MW Industries Inc.

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 18 bp (basis points), as of 04/17/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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