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North American Bond Research – August 11, 2020

Posted on August 11, 2020
HIGH YIELD BOND RESEARCH
August 11, 2020
Bond Markets

MARKETS POPPED UP EARLY ON THE NEWS OF RUSSIA FAST TRACKING A COVID VACCINE BY YEARS END. BIDEN CHOSE KAMALA HARRIS AS HIS RUNNING MATE. 10 Year Treasury notes were up 8.4 bps. S&P -0.8%, Dow -0.38%, NASDAQ -1.69%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.5 MILLION+ CASES AND 744000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.3 MILLION+ CASES AND 168000+ 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 +1.4%
  Ford Motor Co. 4.75% 1/15/2043 +1.2%
  Petrobras Global Finance BV 7.375% 1/17/2027 +1.1%
  Delta Airlines 2.9% 10/28/2024 +0.5%
  Delta Airlines 7.375% 1/15/2026 +1.8%
–   T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.2%
  Service Corp. Intl. 3.375% 8/15/2030 -0.1%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -1.6%
  Pacific Gas & Electric Co. 4% 12/1/2046 -0.0%
  United Rentals North AM 3.875% 2/15/2031 -0.5%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Service Corp. Intl.   3.375% 8/15/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4% 12/1/2046
United Rentals North AM   3.875% 2/15/2031
MGIC Investment Corp.   5.25% 8/15/2028
Pacific Gas & Electric Co.   3.5% 6/15/2025
Pacific Gas & Electric Co.   4.55% 7/1/2030
Equinix Inc.   5.375% 5/15/2027
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.16% 0.46% 3.33% 6.58% 5.21% 8.72%
Mining 0.09% 0.87% 5.66% 27.41% -10.56% -5.99%
Construction -0.00% 0.40% 3.81% 10.12% 3.83% 8.08%
Manufacturing -0.02% 0.46% 3.60% 10.67% 2.88% 7.87%
Transportion, Communication, Electric/Gas -0.01% 0.35% 3.07% 7.97% 4.04% 7.44%
Wholesale -0.01% 0.26% 3.33% 9.82% 1.78% 5.70%
Retail -0.14% 0.19% 4.46% 12.16% 0.35% 4.22%
Finance, Insurance, Real-Estate 0.04% 0.47% 3.58% 11.20% 1.43% 5.30%
Services 0.02% 0.37% 3.85% 9.67% 1.71% 6.38%
Public Administration 0.21% 1.60% 4.48% 11.96% 5.87% 9.86%
Energy 0.05% 0.79% 5.84% 22.92% -8.26% -3.53%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Iron Mountain Inc. (USD) 4.5% 2/15/2031 Reg S (08/10/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

2. Ball Corp. (USD) 2.875% 8/15/2030 (08/10/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.88%.

3. Wyndham Hotels & Resorts Inc. (USD) 4.375% 8/15/2028 Reg S (08/10/2020): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

4. Wyndham Hotels & Resorts Inc. (USD) 4.375% 8/15/2028 144A (08/10/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

5. CDW LLC CDW Finance Corp. (USD) 3.25% 2/15/2029 (08/10/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.25%.

6. Cascades Inc. (USD) 5.375% 1/15/2028 (08/10/2020): 300MM Senior Unsecured Notes, Price at Issuance 104.25, Yielding 4.69%.

7. Iron Mountain Inc. (USD) 4.5% 2/15/2031 144A (08/10/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

8. AMN Healthcare Inc. (USD) 4.625% 10/1/2027 (08/10/2020): 200MM Senior Unsecured Notes, Price at Issuance 101, Yielding 4.46%.

9. Covanta Holding Corp. (USD) 5% 9/1/2030 (08/11/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

10. Windstream Escrow LLC Windstream Escrow Finance Corp. (USD) 7.75% 8/15/2028 144A (08/11/2020): 1400MM First Lien Notes, Price at Issuance 100, Yielding 7.75%.

1. CJ Foods Inc.: $285MM TLB

2. Herschend Entertainment Co. LLC: $465MM TLB (B3/B)

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

4. MAG Aerospace: $290.7MM TL (B3/B)

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

6. Smart Start Inc.: $350MM TLB

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

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

9. CJ Foods Inc.: $285MM TLB

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

Additional Commentary

NEW ISSUANCE WATCH: Ball Corp issued 1300 MM in notes.
Top Widening Loans Top Narrowing Loans
CPA Global (EUR) TLB E+325 11/30/2024
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Ahlsell AB (EUR) TL E+825 03/01/2027
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Keter Group BV (EUR) TLB E+425 10/01/2023
DigiCert Inc. (USD) TL2 10/16/2027
Parques Reunidos (EUR) TLB E+375 09/27/2026
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026
Kiwi Holding IV Sarl (EUR) TLB E+325 07/27/2024

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 17 bp (basis points), as of 08/11/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
August 11, 2020
Bond Markets

MARKETS POPPED UP EARLY ON THE NEWS OF RUSSIA FAST TRACKING A COVID VACCINE BY YEARS END. BIDEN CHOSE KAMALA HARRIS AS HIS RUNNING MATE. 10 Year Treasury notes were up 8.4 bps. S&P -0.8%, Dow -0.38%, NASDAQ -1.69%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.5 MILLION+ CASES AND 744000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.3 MILLION+ CASES AND 168000+ 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
+   Block Financial LLC 3.875% 8/15/2030 +0.1%
  Southwest Airlines Co. 5.25% 5/4/2025 +0.8%
  General Electric Co. FLT% PERP (1) +2.2%
  Host Hotels & Resorts LP 4% 6/15/2025 +0.0%
  Gusap III LP 4.25% 1/21/2030 Reg S +0.7%
–   JPMorgan Chase & Co. 2.522% 4/22/2031 -0.8%
  Boeing Co. 5.805% 5/1/2050 -0.0%
  Oracle Corp. 3.85% 4/1/2060 -1.8%
  Regeneron Pharmaceuticals Inc. 2.8% 9/15/2050 -1.6%
  BP Capital Markets America Inc. 2.772% 11/10/2050 -0.8%
JPMorgan Chase & Co.   2.522% 4/22/2031
Boeing Co.   5.805% 5/1/2050
Oracle Corp.   3.85% 4/1/2060
Regeneron Pharmaceuticals Inc.   2.8% 9/15/2050
BP Capital Markets America Inc.   2.772% 11/10/2050
American Express Co.   2.5% 8/1/2022
JPMorgan Chase & Co.   FLT% 10/24/2023
Regeneron Pharmaceuticals Inc.   1.75% 9/15/2030
Block Financial LLC   3.875% 8/15/2030
Southwest Airlines Co.   5.25% 5/4/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.06% 0.76% 3.36% 12.57% 6.83% 8.94%
Construction -0.09% 0.50% 2.40% 8.61% 5.72% 6.56%
Manufacturing -0.03% 0.43% 2.06% 7.43% 8.52% 10.57%
Transportion, Communication, Electric/Gas -0.11% 0.54% 2.56% 8.78% 10.50% 12.58%
Wholesale -0.02% 0.40% 2.29% 8.01% 6.95% 10.84%
Retail -0.08% 0.38% 1.82% 7.69% 10.19% 13.26%
Finance, Insurance, Real-Estate 0.02% 0.29% 1.45% 5.83% 6.57% 8.49%
Services -0.04% 0.36% 1.76% 6.89% 7.87% 10.01%
Public Administration 0.02% -0.01% 0.29% 0.43% 4.56% 4.49%
Energy -0.06% 0.79% 3.02% 12.35% 5.86% 8.43%
 
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:  Ecolab Inc issued 1100 MM in notes.
Top Widening Loans Top Narrowing Loans
CPA Global (EUR) TLB E+325 11/30/2024
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Ahlsell AB (EUR) TL E+825 03/01/2027
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Keter Group BV (EUR) TLB E+425 10/01/2023
DigiCert Inc. (USD) TL2 10/16/2027
Parques Reunidos (EUR) TLB E+375 09/27/2026
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026
Kiwi Holding IV Sarl (EUR) TLB E+325 07/27/2024

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 17 bp (basis points), as of 08/11/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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