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North American Bond Research – August 10, 2020

Posted on August 10, 2020
HIGH YIELD BOND RESEARCH
August 10, 2020
Bond Markets

INFECTION RATES HAVE STARTED TO SLOW HELPING MARKETS MOVE UP EXCEPT NASDAQ. TRUMP EXECUTIVE ORDER PROMPTS THE MARKETS TO SURMISE THAT ONE WAY OR ANOTHER WORKERS WILL GET HELP. 10 Year Treasury notes were up 12 bps. S&P +0.27%, Dow +1.30%, NASDAQ -0.39%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.2 MILLION+ CASES AND 737000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.2 MILLION+ CASES AND 166000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028 made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.1%
  Comstock Resources Inc. 9.75% 8/15/2026 +0.8%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.1%
  HCA Inc. 5% 3/15/2024 +0.2%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.0%
–   T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.1%
  United Rentals North AM 3.875% 2/15/2031 -0.3%
  Ford Motor Credit Co. 3.815% 11/2/2027 -0.0%
  L Brands Inc. 7.5% 6/15/2029 -0.0%
  Transocean Sedco Forex Inc. 7.5% 4/15/2031 -0.7%
Pacific Gas & Electric Co.   4.55% 7/1/2030
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Comstock Resources Inc.   9.75% 8/15/2026
United Rentals North AM   3.875% 2/15/2031
T-Mobile USA Inc.   3.5% 4/15/2025 144A
HCA Inc.   5% 3/15/2024
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Ford Motor Credit Co.   3.815% 11/2/2027
MGM Resorts Intl   6.75% 5/1/2025
L Brands Inc.   7.5% 6/15/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% 0.42% 3.39% 6.36% 5.04% 8.63%
Mining 0.11% 1.25% 5.33% 27.08% -12.70% -8.07%
Construction 0.06% 0.50% 3.75% 10.76% 3.80% 8.45%
Manufacturing 0.00% 0.60% 3.77% 11.38% 2.41% 7.66%
Transportion, Communication, Electric/Gas 0.00% 0.49% 2.90% 8.22% 4.02% 7.76%
Wholesale -0.02% 0.46% 2.69% 9.65% 2.23% 6.44%
Retail -0.02% 0.48% 4.33% 13.46% -0.33% 3.74%
Finance, Insurance, Real-Estate 0.03% 0.63% 3.42% 10.49% 1.95% 6.34%
Services 0.02% 0.56% 3.64% 9.78% 1.30% 6.53%
Public Administration 0.11% 1.60% 3.75% 11.51% 5.51% 9.43%
Energy 0.04% 1.20% 5.83% 24.02% -9.13% -4.31%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Iron Mountain Inc. (USD) 4.5% 2/15/2031 144A (08/10/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%. 1. CJ Foods Inc.: $285MM TLB

2. Tutor Perini: $375MM TLB (Ba3/BB-/BB+)

3. Smart Start Inc.: $350MM TLB

4. RSA: $1.425B credit facilities: $75MM revolver; $1B TL; $350MM TL

5. MAG Aerospace: $290.7MM TL (B3/B)

6. Logmein Inc.: $2.45B credit facilities: $1.95B first lien TL; $500MM second-lien TL

7. Windstream Holdings Inc.: $750MM TLB (B3/B)

8. Concord : $1.05B credit facilities (B1/B+): $450MM revolver; $600MM TLB

9. Tutor Perini: $375MM TLB (Ba3/BB-/BB+)

10. Smart Start Inc.: $350MM TLB

Additional Commentary

NEW ISSUANCE WATCH: Iron Mountain Inc. issued 1100 MM in notes.
Top Widening Loans Top Narrowing Loans
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Coty Inc. (EUR) TLA E+175 04/05/2023
Albertsons LLC (USD) TLB8 L+275 08/17/2026
Eagle 4 Limited (USD) TL L+775 06/14/2027
Diebold Inc. (USD) RC L+350 08/30/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Autokiniton US Hldg, Inc. (USD) TLB L+575 05/22/2025
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • Symantec Corp., Broadcom LTD, Toll Brothers Inc., Cole-Parmer Instrument Co.

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 16 bp (basis points), as of 08/10/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
August 10, 2020
Bond Markets

INFECTION RATES HAVE STARTED TO SLOW HELPING MARKETS MOVE UP EXCEPT NASDAQ. TRUMP EXECUTIVE ORDER PROMPTS THE MARKETS TO SURMISE THAT ONE WAY OR ANOTHER WORKERS WILL GET HELP. 10 Year Treasury notes were up 12 bps. S&P +0.27%, Dow +1.30%, NASDAQ -0.39%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.2 MILLION+ CASES AND 737000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.2 MILLION+ CASES AND 166000+ DEATHS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Halliburton Co. (USD) 5% 11/15/2045 made analysts’ ‘Conviction Buy’ list. (See the chart below for Halliburton Co.  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.1%
  Verizon Communications Inc. FLT% 5/15/2025 +0.3%
  Marriott Intl Inc. 5.75% 5/1/2025 +0.1%
  General Mills Inc. FLT% 4/16/2021 +0.2%
  Pioneer Natural Resources Co. 1.9% 8/15/2030 +0.0%
–   BP Capital Markets America Inc. 2.772% 11/10/2050 -1.1%
  Activision Blizzard Inc. 2.5% 9/15/2050 -1.1%
  Alphabet Inc. 2.05% 8/15/2050 -0.2%
  Lincoln National Corp. 3.05% 1/15/2030 -0.4%
  Alphabet Inc. 2.25% 8/15/2060 -0.5%
BP Capital Markets America Inc.   2.772% 11/10/2050
Activision Blizzard Inc.   2.5% 9/15/2050
Pacific Gas & Electric Co.   4.55% 7/1/2030
Alphabet Inc.   2.05% 8/15/2050
Lincoln National Corp.   3.05% 1/15/2030
Alphabet Inc.   2.25% 8/15/2060
AstraZeneca PLC   1.375% 8/6/2030
Dupont de Nemours Inc.   2.169% 5/1/2023
Verizon Communications Inc.   FLT% 5/15/2025
Marriott Intl Inc.   5.75% 5/1/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.04% 0.62% 3.65% 12.51% 6.90% 8.87%
Construction 0.09% 0.44% 2.74% 7.88% 5.78% 6.19%
Manufacturing -0.00% 0.30% 2.39% 7.28% 8.45% 10.35%
Transportion, Communication, Electric/Gas 0.02% 0.38% 3.25% 8.42% 10.68% 12.37%
Wholesale -0.07% 0.28% 2.45% 8.10% 7.34% 10.95%
Retail 0.00% 0.32% 2.24% 7.33% 10.23% 12.96%
Finance, Insurance, Real-Estate -0.00% 0.24% 1.55% 5.63% 6.51% 8.24%
Services -0.01% 0.24% 2.13% 6.71% 8.00% 9.92%
Public Administration -0.27% -0.27% 0.00% 0.39% 4.34% 4.40%
Energy 0.05% 0.62% 3.17% 12.26% 5.89% 8.13%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Air Lease Corp. (USD) 2.875% 1/15/2026 (08/10/2020): 700MM Senior Unsecured Notes, Price at Issuance 98.972, Yielding 3.08%.

2. Chevron USA Inc. (USD) FLT% 8/11/2023 (08/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 100.

3. Chevron USA Inc. (USD) FLT% 8/12/2022 (08/10/2020): 350MM Senior Unsecured Notes, Price at Issuance 100.

4. Bunge LTD Finance Corp. (USD) 1.63% 8/17/2025 (08/10/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.995, Yielding 1.63%.

5. Kimco Realty Corp. (USD) 1.9% 3/1/2028 (08/10/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.554, Yielding 1.96%.

6. Great-West Lifeco Inc. (USD) 0.904% 8/12/2025 144A (08/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding .9%.

7. Visa Inc. (USD) 2% 8/15/2050 (08/10/2020): 1750MM Senior Unsecured Notes, Price at Issuance 98.928, Yielding 2.05%.

8. Ecolab Inc. (USD) 1.3% 1/30/2031 (08/10/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.942, Yielding 1.31%.

9. Ecolab Inc. (USD) 2.125% 8/15/2050 (08/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.121, Yielding 2.16%.

10. Chevron USA Inc. (USD) 1.018% 8/12/2027 (08/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.02%.

Additional Commentary

NEW ISSUANCE WATCH: Air Lease Corpissued 2000 MM in notes.
Top Widening Loans Top Narrowing Loans
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Coty Inc. (EUR) TLA E+175 04/05/2023
Albertsons LLC (USD) TLB8 L+275 08/17/2026
Eagle 4 Limited (USD) TL L+775 06/14/2027
Diebold Inc. (USD) RC L+350 08/30/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Autokiniton US Hldg, Inc. (USD) TLB L+575 05/22/2025
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • Symantec Corp., Broadcom LTD, Toll Brothers Inc., Cole-Parmer Instrument Co.

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 16 bp (basis points), as of 08/10/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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