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High Yield Bond Research April 30, 2019

Posted on April 30, 2019
HIGH-YIELD DEBT RETAINED AN EDGE AGAINST INVESTMENT GRADE BONDS in net prices linked to actual trades. Muted signs of inflation have agitated bond investors to be the most bullish on longer-dated U.S. Treasuries since 2016. The Fed’s preferred method of evaluating inflation, the rate of Personal consumption expenditure increased by 1.7 percent on a year-over-year basisThe 10-year note lost 2.3 basis points. S&P -0.01%, DOW +0.08%, NASDAQ -0.75%.
PENDING HOME SALES CLIMBED 3.8 PERCENT IN MARCH surpassing estimates of 0.7 percent rising to an eight-month high. G-component Alphabet of the FAANG group tumbled 8 percent after reporting disappointing sales growth erasing $60 billion off its market cap.  Ad revenue dipped nearly 5 percent quarter-over-quarter and only grew 15 percent year-over-year. People are definitely taking some profits off names like Apple, Google. There could be a little ‘peaking’ mentality here considering how indexes are at record levels”.  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,   Transocean Inc. (USD) 9% 7/15/2023 144A made analysts’ ‘Conviction Buy’ lists. (See the chart for Transocean Inc. bonds below.) Corey Mahoney cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Charter Communications Operating LLC 5.75% 4/1/2048 + 0.8%
  Broadcom Corp. 3.5% 1/15/2028 + 0.4%
–   Dish DBS Corp. 7.75% 7/1/2026 -0.3%
HCA Inc.   4.5% 2/15/2027
Petrobras Global Finance BV   7.375% 1/17/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.02% -0.13% 0.60% 4.71% 7.30% 6.87%
Mining -0.10% -0.09% 1.64% 4.03% 9.32% 4.04%
Construction -0.05% 0.15% 1.54% 5.42% 8.34% 5.73%
Manufacturing -0.04% 0.26% 1.19% 4.70% 7.88% 6.65%
Transportion, Communication, Electric/Gas 0.01% 0.29% 1.37% 5.39% 7.83% 6.94%
Wholesale 0.07% 0.25% 1.09% 4.13% 7.76% 5.05%
Retail 0.05% 0.52% 1.78% 4.99% 8.53% 5.22%
Finance, Insurance, Real-Estate -0.04% 0.22% 0.96% 4.36% 7.67% 6.81%
Services -0.01% 0.27% 1.05% 4.21% 7.98% 7.35%
Public Administration 0.02% 0.23% 0.43% 2.98% 6.17% 10.08%
Energy -0.15% 0.00% 1.65% 4.27% 9.17% 3.45%
 
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-04-30T172713.721

New Issues Forward Calendar
1. Moss Creek Resources LLC (USD) 10.5% 5/15/2027 144A (04/29/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 10.5%. 1. Twin River Management Group Inc.: $350M bonds, Expected Q2 2019

2. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 4/29/19 participants welcome a $500MM new corporate-bond offering by
Moss Creek Resources LLC.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/26/19, with a net outflow of $0.520B, year-to-date $13.8B 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

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • JBS USA LLC, Sundyne US Purchaser, Prysmian, Project Maple II BV, Trade Me Group LTD

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 17 bp (basis points), as of 04/30/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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