Investment Grade Bond Research – April 16, 2019

INDUSTRIAL PRODUCTION DECLINED 0.1 PERCENT in March, analysts expected a rise in production of 0.1 percent.  Auto production sank 2.5 percent in March and in the first quarter auto production fell at an annual rate of 12.8 percent.  “Manufacturing production has pivoted to the downside in the first quarter of the year, showing the revival in factories and output is sputtering for the first time since the Trump economics team took office” stated Chris Rupkey, chief economist at MUFG.  The sluggish data is expected to keep the Federal Reserve in a “patient” stance in regards to raising rates. 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, Frontier Communications Corp. (USD) 6.25% 9/15/2021 made analysts’ ‘Conviction Buy’ lists. (See the chart for ADI indices above.) Corey Mahoney cmahoney@advantagedata.com).

Key Gainers and Losers	Volume Leaders
+   Walt Disney Co. 4.95% 10/15/2045 144A + 0.1%   FirstEnergy Transmission LLC 4.55% 4/1/2049 144A + 0.3% –   Mars Inc. 3.95% 4/1/2049 144A -0.4%	21st Century Fox America   5.576% 1/25/2049 144A Dell Intl LLC   5.3% 10/1/2029 144A

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.37% 0.28% 1.48% 4.42% 4.76% 4.48% Mining 0.04% 0.42% 1.86% 4.92% 5.85% 4.80% Construction 0.12% 0.17% 1.39% 3.69% 4.16% 4.45% Manufacturing 0.04% 0.25% 1.32% 3.81% 4.03% 4.00% Transportion, Communication, Electric/Gas 0.07% 0.32% 1.83% 4.91% 5.15% 5.13% Wholesale 0.08% 0.29% 1.33% 4.25% 4.86% 3.88% Retail 0.04% 0.20% 1.32% 4.09% 4.32% 4.35% Finance, Insurance, Real-Estate 0.04% 0.14% 0.90% 3.32% 3.54% 4.61% Services 0.05% 0.18% 1.22% 3.66% 3.91% 4.77% Public Administration 0.03% 0.01% 0.31% 1.00% 0.99% 3.23% Energy 0.08% 0.41% 1.88% 5.25% 6.03% 5.28%   Total returns (non-annualized) by rating, market weighted.

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Trade Me Group LTD, Jane Street, Six Flags Inc., MW Industries Inc.

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 19 bp (basis points), as of 04/16/19
• Net positive capital flows into high-yield ETFs & mutual funds

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