Grid IconAll Posts Market Summaries

Investment Grade Bond Research – March 22, 2019

Posted on March 22, 2019

RISK-OFF SENTIMENT PREVAILED AS INVESTMENT-GRADE DEBT significantly outpaced junk bonds in net prices linked to actual trades.  Equities receded after the release of weak economic data, despite the 11.8 percent increase jump in existing home sales in February.  A cooling trend has emerged, “Homes aren’t flying off the market as they have been” Cheryl Young senior economist at Trulia.  The 10-year U.S. Treasury note plummeted 9.6 basis point.  S&P -1.90%, Dow -1.77%, NASDAQ -2.50%

YIELD CURVE INVERSION SENDS SHOCKWAVES through the market spooking investors and sparking recession anxieties.  The 3-month bill and the 10-year note inverted for the first time since 2007 after the release of disappointing U.S. manufacturing data.  The Purchasing Managers Index declined 0.5 percent to 52.5, missing expectations of 53.6 further solidifying the Feds decision to keep rates at the current levels until the end of 2019.   Lending for equipment sank 24 percent in February compared to the prior year and 18 percent from January 2019.  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,  Citigroup Inc. (USD) 6.875% 3/5/2038 made analysts’ ‘Conviction Buy’ lists. (See the chart for Citigroup Inc. below) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   BMW US Capital LLC 1.5% 4/11/2019 144A + 0.0%
  Halfmoon Parent Inc. 4.125% 11/15/2025 144A + 0.4%
–   UBS Group Funding AG (USD) VAR% PERP 144A -0.4%
BMW US Capital LLC   1.5% 4/11/2019 144A
Dell Intl LLC   4% 7/15/2024 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.09% 0.49% 1.21% 3.58% 3.37% 4.60%
Mining 0.12% 0.68% 1.28% 4.74% 4.37% 4.55%
Construction 0.09% 0.65% 1.57% 3.58% 3.08% 4.81%
Manufacturing 0.11% 0.57% 1.11% 3.40% 3.14% 3.86%
Transportion, Communication, Electric/Gas 0.12% 0.79% 1.54% 4.24% 3.92% 5.04%
Wholesale 0.15% 0.60% 1.48% 4.31% 4.32% 4.39%
Retail 0.07% 0.60% 1.13% 3.55% 3.32% 4.22%
Finance, Insurance, Real-Estate 0.06% 0.42% 1.01% 3.12% 2.71% 4.71%
Services 0.11% 0.63% 1.21% 3.36% 3.05% 4.78%
Public Administration -0.01% 0.22% 0.53% 1.40% 0.95% 3.56%
Energy 0.14% 0.72% 1.43% 5.00% 4.75% 5.06%
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Prime Security Services Borrower LLC (USD) 5.25% 4/15/2024 144A (03/21/2019): 750MM First Lien Notes, Price at Issuance 100, Yielding 5.25%.

2. Bank of Montreal (USD) FLT% 3/26/2022 (03/21/2019): 500MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 3/21/19 participants welcome a $200MM new corporate-bond offering by
Toyota Credit Canada Inc.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/15/19, with a net inflow of $1.0B, year-to-date $8.2B flowed into high-yield.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
SuperValu Inc. (5Y Sen USD XR14)
San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:

  • Carbonite Inc, HotelBeds, Nine West Holdings Inc., TruGreen LP

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 14 bp (basis points), as of 03/22/19
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved.

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.

Are you using AdvantageData?

AdvantageData is your fixed income solution for pricing, analytics, reports, and insight on approximately:

  • 500,000+ U.S. and international corporate bonds
  • Over 300,000+ BDC fair value assessments dating back to 2000
  • Over 22,000+ syndicated loans
  • Over 100 equity markets worldwide
  • One platform 15 products and services from debt to loans to mid-market
  • Used by top buy and sell-side firms worldwide


facebook share icon twitter share icon linkedin share icon
Ready to get Started? Free Trial