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Investment Grade Bond Research – April 25, 2019

Posted on April 25, 2019

JOBLESS CLAIMS SPIKE by 37,000 soaring past 200,000 hitting a two-and-half month higheconomists attribute the Easter, Passover and spring break for the rise. Despite the uptick, in unemployment applications, the economy remains sound. “Company CEOs may have feared recession in surveys taken at the start of the year, but those concerns have faded” said Chris Rupkey, chief economist at MUFG in New York. The 10-year note rose 0.8 basis points. S&P +0.13%, DOW-0.32%, NASDAQ+0.37%.

U.S. DURABLE GOODS ORDERS JUMPED 2.7 PERCENT in March, exceeding expectations of a 0.8 percent increase.  Orders grew at the fastest rate in seven-months aided by strong demand for autos and planes, orders for commercial aircraft spiked 30 percent alone.  “A strong increase in core capital goods orders is a positive sign for rising business investment into the second quarter, consistent with our view that 2019 will be another year of solid activity,” stated Andrew Hollenhorst, an economist of Citibank. 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,   Ford Motor Co. (USD) 4.75% 1/15/2043 made analysts’ ‘Conviction Buy’ lists. (See the chart for  Ford Motor Co. bonds below) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   AT&T Inc. 3% 6/30/2022 + 0.1%
  Halfmoon Parent Inc. 4.8% 8/15/2038 144A + 0.3%
–   CVS Health Corp. 5.05% 3/25/2048 -0.0%
Bayer US Finance LLC   4.375% 12/15/2028 144A
UniCredit SpA   6.572% 1/14/2022 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% -0.07% 0.26% 3.53% 4.35% 4.66%
Mining 0.21% 0.26% 0.95% 4.18% 6.11% 6.00%
Construction 0.25% 0.41% 0.68% 3.49% 4.41% 5.14%
Manufacturing 0.24% 0.28% 0.58% 3.32% 4.33% 5.06%
Transportion, Communication, Electric/Gas 0.30% 0.35% 0.91% 4.45% 5.61% 6.55%
Wholesale 0.20% 0.27% 0.60% 3.62% 4.96% 5.16%
Retail 0.28% 0.29% 0.54% 3.46% 4.51% 5.61%
Finance, Insurance, Real-Estate 0.17% 0.28% 0.52% 2.95% 3.84% 5.62%
Services 0.26% 0.25% 0.41% 2.98% 4.10% 5.94%
Public Administration 0.17% 0.24% 0.21% 1.19% 1.23% 3.93%
Energy 0.24% 0.25% 0.87% 4.37% 6.26% 6.50%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-04-25T172407.161

New Issues New Issues [Continued]
1. JBS USA LLC (USD) 5.875% 7/15/2024 (04/24/2019): 150MM Senior Unsecured Notes, Price at Issuance 101.75, Yielding 5.48%.

2. Netflix Inc. (USD) 5.375% 11/15/2029 144A (04/24/2019): 900MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.38%.

Additional Commentary

NEW ISSUANCE WATCH: on 4/25/19 participants welcome a $600MM new corporate-bond offering by
Cantor Fitzgerald LP.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/18/19, with a net inflow of $1.1B, year-to-date $14.4B flowed into high-yield.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14)
Hertz Corp. (5Y Sen USD XR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed (95)

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

  • Sundyne US Purchaser, Prysmian, Project Maple II BV, Trade Me Group LTD, Jane Street

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 04/25/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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