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High Yield Bond Research – May 3, 2019

Posted on May 3, 2019
JOBLESSNESS IN THE U.S. has fallen to 3.6%, marking the lowest level since December 1969. This is due in part to a shrinking labor force, but also indicates that the economy remains strong. The Dow Jones recovered well Friday after two days of significant loss, closing up 195 points. 10-Year U.S. Treasury Notes fell 1.5 basis pointsS&P +0.96%, Dow +0.75%, NASDAQ  +1.58%.
TESLA INC. COMPLETED its issuance of  $1.6B in convertible bonds to raise its liquidity. The company also sold about 3.1 million shares of stock, and has seen a nine percent increase in share values since Wednesday. This marks a discernible turnaround for the World’s leading procucer of electric vehicles, after experiencing logistical and manufacturing issues. Crude oil prices rebounded Friday after reaching a one-month low yesterday.  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, Newell Rubbermaid Inc. (USD) 5.375% 4/1/2036 made analysts’ ‘Conviction Buy’ lists. (See the chart for ADI Inedexes above.) Andrew Robartes
Key Gainers and Losers Volume Leaders
+   Petrobras Global Finance BV 7.375% 1/17/2027 + 0.9%
  Tesoro Corp. 5.125% 4/1/2024 + 1.5%
–   US Steel Corp. 6.875% 8/15/2025 -1.3%
Pacific Gas & Electric Co.   6.05% 3/1/2034
Range Resources Corp.   4.875% 5/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.20% 0.55% 1.35% 4.54% 7.79% 8.70%
Mining -0.48% -0.73% 0.83% 2.64% 8.85% 3.85%
Construction -0.13% 0.13% 1.36% 4.76% 8.65% 6.22%
Manufacturing -0.14% -0.02% 0.96% 3.71% 7.62% 6.89%
Transportion, Communication, Electric/Gas -0.12% 0.25% 1.27% 4.57% 7.71% 6.91%
Wholesale -0.13% -0.01% 1.01% 3.75% 8.19% 5.44%
Retail -0.09% 0.60% 2.27% 6.10% 10.81% 8.34%
Finance, Insurance, Real-Estate -0.10% 0.17% 1.05% 3.76% 7.84% 6.79%
Services -0.10% 0.11% 0.95% 3.46% 7.60% 7.43%
Public Administration 0.23% 0.23% 0.43% 2.77% 6.34% 11.15%
Energy -0.46% -0.70% 1.01% 2.89% 8.75% 3.27%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar
1. Altice Luxembourg SA (USD) 10.5% 5/15/2027 144A (05/03/2019):1600MM Senior Unsecured Notes.

2. Twin River Worldwide Hldgs. Inc. (USD) 6.75% 6/1/2027 Reg S (05/03/2019): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.75%.

1. General Electric Distributed Power: $600M high-yield bonds, Expected Q2 2019 

2. Calpine Corp.: $1.4B bonds, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 5/3/19 participants welcome a $400MM new corporate-bond offering by
Twin River Worldwide Hldgs. Inc.  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 CR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
Cable & Wireless Communication (5Y Sen USD CR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

  • Lonsdale Finance Pty LTD, iHeartCommunications Inc., Flexera Software Inc., JBS USA LLC

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 15 bp (basis points), as of 05/03/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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