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Investment Grade Bond Research – April 29, 2019

Posted on April 29, 2019

JUNK BONDS ROSE AGAINST INVESTMENT GRADE DEBT as investors anticipate a sound jobs report showing growth despite the rocky start to 2019Gold edged lower as positive Chinese economic data revealed industrial firms reported a rise in profits for the first time in four months. The S&P 500 and NASDAQ closed at record highs lifted by more positive earningsThe 10-year note rose 2.6 basis points. S&P +0.11%, DOW +0.04%, NASDAQ +0.19%.

CONSUMER SPENDING ROSE BY 0.7 PERCENT in March aided by an uptick in vehicle purchases and January’s number was revised up to 0.3 percent. “The economy is in a sweet spot for now with not enough inflation to cause the Fed to raise rates, and with inflation not low enough to worry Fed officials that economic demand is weakening, which could require rate cuts”.  Inflation held steady at 1.6 percent according to the Personal Consumer Expenditures (PCE) Price Index. 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,   Barclays PLC (USD) 4.375% 9/11/2024  made analysts’ ‘Conviction Buy’ lists. (See the chart for  ADI Indexes above) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Ford Motor Credit Co. 3.336% 3/18/2021 + 0.0%
  JP Morgan Chase & Co. 3.25% 9/23/2022 + 0.2%
–   Newell Rubbermaid Inc. 4.2% 4/1/2026 -0.9%
Toyota Motor Credit Corp.   1.95% 4/17/2020
Baker Hughes Inc.   4.08% 12/15/2047
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.06% 0.21% 0.43% 3.74% 4.82% 4.68%
Mining 0.07% 0.21% 0.73% 4.15% 6.06% 6.52%
Construction 0.14% 0.44% 0.57% 3.72% 4.37% 5.51%
Manufacturing 0.14% 0.28% 0.49% 3.43% 4.46% 5.36%
Transportion, Communication, Electric/Gas 0.13% 0.32% 0.75% 4.66% 5.64% 6.78%
Wholesale 0.12% 0.32% 0.58% 3.77% 5.31% 5.69%
Retail 0.10% 0.24% 0.34% 3.53% 4.59% 5.83%
Finance, Insurance, Real-Estate 0.12% 0.26% 0.40% 3.04% 3.95% 5.75%
Services 0.14% 0.32% 0.34% 3.21% 4.26% 6.27%
Public Administration 0.08% 0.24% 0.11% 1.35% 1.28% 3.97%
Energy 0.09% 0.23% 0.73% 4.47% 6.33% 6.95%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-04-29T170939.079

New Issues New Issues [Continued]


(None Current 04/29/2019)


Additional Commentary

NEW ISSUANCE WATCH: on 4/26/19 participants welcome a $75MM new corporate-bond offering by
Sector RE V LTD.  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)
Cable & Wireless Communication (5Y Sen USD CR14)
San Miguel Corp. (5Y Sen USD CR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

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

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 04/29/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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