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High Yield Bond Research – March 26, 2019

Posted on March 26, 2019

INVESTMENT GRADE-DEBT EDGED OUT JUNK BONDS in net prices linked to actual trades. Housing starts plunged nearly 9 percent in February; the northeast took the most significant hit as permits sank 30 percent. The hottest housing markets, Seattle and San Francisco continue to show signs of cooling off even as interest rates decline. The 10-year U.S. Treasury note rose 1.5 basis point. S&P +0.37%, Dow +0.27%, NASDAQ +0.32%

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CONSUMER CONFIDENCE TOOK A NOTABLE DIP in March, the latest economic indicator drifting lower. The 12 point decline was the largest one-month contraction since the recession in 2008. The confidence Board said, “the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.” A-component Apple of the FAANG group settled 1 percent lower after a U.S. Judge ruled the company violated a Qualcomm patent and recommended some products be banned from import. Delivery of May WTI Crude advanced 2.07 percent upon indicators of a tightening supply and demand concerns in China. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds. High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Southern California Edison Company (USD) 5.55% 1/15/2037 made analysts’ ‘Conviction Buy’ lists. (See the chart for ADI indexes above) Corey Mahoney cmahoney@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	Centennial Resource Production, LLC 6.875% 4/1/2027 144A	+ 0.2%
	Tennessee Merger Sub Inc. 6.375% 2/1/2025 144A	+ 3.7%
–	Valeant Pharmaceuticals Intl. Inc. 5.5% 11/1/2025 144A	-0.4%

Sealed Air Corp. 5.25% 4/1/2023 144A
Centennial Resource Production, LLC 6.875% 4/1/2027 144A

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.02%	1.11%	2.32%	6.65%	6.16%	5.72%
Mining	-0.09%	0.36%	-0.04%	7.60%	7.29%	2.77%
Construction	0.01%	0.25%	0.78%	5.90%	5.63%	3.79%
Manufacturing	-0.11%	0.24%	0.90%	6.58%	6.10%	5.61%
Transportion, Communication, Electric/Gas	-0.05%	0.17%	1.19%	6.06%	5.57%	5.91%
Wholesale	-0.06%	0.15%	0.67%	6.12%	5.99%	3.93%
Retail	-0.01%	0.14%	1.19%	7.99%	7.75%	4.32%
Finance, Insurance, Real-Estate	-0.00%	0.24%	1.20%	6.49%	6.20%	6.13%
Services	-0.04%	0.11%	0.68%	6.94%	6.47%	5.82%
Public Administration	-0.34%	-0.14%	1.03%	4.80%	5.06%	10.74%
Energy	-0.04%	0.40%	0.17%	7.18%	6.99%	3.09%

Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
(None Current 03/26/2019)	1. ADT Inc.: $2.75B, Expected Q2 2019 2. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q1 2019

New Issues

Forward Calendar

(None Current 03/26/2019)

1. ADT Inc.: $2.75B, Expected Q2 2019

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

Additional Commentary

NEW ISSUANCE WATCH: on 3/22/19 participants welcome a $410MM new corporate-bond offering by
Neon Holding Co. LLC. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/22/19, with a net inflow of $1.8B, year-to-date $10B flowed into high-yield.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD XR14)	SuperValu Inc. (5Y Sen USD MR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Fred Olsen Wind LTD, Carbonite Inc, HotelBeds, Nine West Holdings Inc., TruGreen LP

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 03/26/19
Net positive capital flows into high-yield ETFs & mutual funds

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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