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North American Bond Research – August 12, 2020

Posted on August 12, 2020
HIGH YIELD BOND RESEARCH
August 12, 2020
Bond Markets

HOPES OF A STIMULUS DEAL AND PROGRESS ON A VACCINE PUSHED MARKETS HIGHER. FEDERAL GOVERNMENT’S STIMULUS AND LIQUIDITY ARE DRIVING THESE MARKETS, NOT COMPANY FUNDAMENTALS. 10 Year Treasury notes were up 1.2 bps. S&P +1.4%, Dow +1.05%, NASDAQ +2.13%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.7 MILLION+ CASES AND 750000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.35 MILLION+ CASES AND 169000+ 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
+   Eclipse Resources Corp. 8.875% 7/15/2023 +10.5%
  Ford Motor Co. 8.5% 4/21/2023 +0.7%
  CNO Financial Group 5.25% 5/30/2025 +0.3%
  Teva Pharmaceuticals Fin BV 6.75% 3/1/2028 +0.5%
  Manitowoc Foodservice Inc. 9.5% 2/15/2024 +3.4%
–   Petrobras Global Finance BV 7.375% 1/17/2027 -0.5%
  Ball Corp. 2.875% 8/15/2030 -0.4%
  Pacific Gas & Electric Co. 4.25% 3/15/2046 -1.3%
  Petrobras Global Finance BV 6.85% 6/5/2115 -1.3%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.4%
Petrobras Global Finance BV   7.375% 1/17/2027
Eclipse Resources Corp.   8.875% 7/15/2023
Ball Corp.   2.875% 8/15/2030
Pacific Gas & Electric Co.   4.25% 3/15/2046
Ford Motor Co.   8.5% 4/21/2023
Petrobras Global Finance BV   6.85% 6/5/2115
Pacific Gas & Electric Co.   4.95% 7/1/2050
CNO Financial Group   5.25% 5/30/2025
United Rentals North AM   3.875% 2/15/2031
Occidental Petroleum Corp.   8.875% 7/15/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.04% 0.47% 3.77% 7.26% 5.33% 9.18%
Mining 0.10% 0.90% 6.02% 26.97% -9.68% -5.18%
Construction -0.01% 0.25% 3.75% 10.23% 3.63% 8.23%
Manufacturing -0.00% 0.37% 3.72% 11.35% 2.50% 7.43%
Transportion, Communication, Electric/Gas -0.05% 0.29% 3.03% 8.14% 4.12% 7.73%
Wholesale -0.12% 0.25% 3.32% 11.09% 1.74% 5.63%
Retail -0.05% 0.09% 4.11% 11.55% 0.36% 4.13%
Finance, Insurance, Real-Estate -0.04% 0.46% 3.39% 10.28% 1.58% 5.64%
Services -0.03% 0.31% 3.74% 9.46% 1.58% 6.21%
Public Administration 0.11% 1.20% 4.48% 11.96% 5.89% 9.86%
Energy 0.10% 0.85% 6.09% 23.02% -7.72% -3.00%
 
Total returns (non-annualized) by rating, market weighted.

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

2. Albertsons Cos Safeway (USD) 3.25% 3/15/2026 144A (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.25%.

3. 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%.

4. Albertsons Cos Safeway (USD) 3.25% 3/15/2026 Reg S (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.25%.

5. Targa Resources Partners LP (USD) 4.875% 2/1/2031 Reg S (08/11/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

6. Targa Resources Partners LP (USD) 4.875% 2/1/2031 144A (08/11/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

7. Albertsons Cos Safeway (USD) 3.5% 3/15/2029 144A (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.5%.

8. Albertsons Cos Safeway (USD) 3.5% 3/15/2029 Reg S (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.5%.

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

10. Clearwater Paper Corp. (USD) 4.75% 8/15/2028 144A (08/11/2020): 275MM Senior Unsecured Notes, Price at Issuance 275, Yielding -9.4%.

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

2. Smart Start Inc.: $350MM TLB

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

4. MAG Aerospace: $290.7MM TL (B3/B)

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

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

7. CJ Foods Inc.: $285MM TLB

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

9. Smart Start Inc.: $350MM TLB

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

Additional Commentary

NEW ISSUANCE WATCH: Covanta Holding Corp. issued 400 MM in notes.
Top Widening Loans Top Narrowing Loans
McClatchy Co. (USD) TLA 7.795% 07/15/2030
Excelitas Technologies Corp. (EUR) TL E+350 12/04/2024
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Coty Inc. (EUR) TLB E+250 04/05/2025
Mavenir Inc. (USD) TLB L+600 05/08/2025
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
TCW Group (USD) TLB L+175 12/27/2024
Tacala LLC (USD) TLB L+350 02/05/2027
Fleetpride Corp. (USD) TL L+450 12/19/2025

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 08/12/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
August 12, 2020
Bond Markets

HOPES OF A STIMULUS DEAL AND PROGRESS ON A VACCINE PUSHED MARKETS HIGHER. FEDERAL GOVERNMENT’S STIMULUS AND LIQUIDITY ARE DRIVING THESE MARKETS, NOT COMPANY FUNDAMENTALS. 10 Year Treasury notes were up 1.2 bps. S&P +1.4%, Dow +1.05%, NASDAQ +2.13%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 20.7 MILLION+ CASES AND 750000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.35 MILLION+ CASES AND 169000+ 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
+   Visa Inc. 2% 8/15/2050 +0.2%
  Chevron USA Inc. 0.687% 8/12/2025 +0.2%
  Alphabet Inc. 2.05% 8/15/2050 +1.6%
  Chevron USA Inc. 2.343% 8/12/2050 +0.0%
  Apple Inc. 2.25% 2/23/2021 +0.1%
–   CVS Health Corp. 5.05% 3/25/2048 -0.2%
  JPMorgan Chase & Co. 2.522% 4/22/2031 -0.1%
  CVS Health Corp. 4.3% 3/25/2028 -0.5%
  CVS Health Corp. 3.75% 4/1/2030 -0.5%
  Anheuser-Busch Inbev Worldwide Inc. 4.9% 2/1/2046 -0.4%
CVS Health Corp.   5.05% 3/25/2048
JPMorgan Chase & Co.   2.522% 4/22/2031
Host Hotels & Resorts LP   3.5% 9/15/2030
CVS Health Corp.   4.3% 3/25/2028
Visa Inc.   2% 8/15/2050
CVS Health Corp.   3.75% 4/1/2030
Anheuser-Busch Inbev Worldwide Inc.   4.9% 2/1/2046
AstraZeneca PLC   1.375% 8/6/2030
SYSCO Corp.   6.6% 4/1/2050
Chevron USA Inc.   0.687% 8/12/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.15% 0.27% 2.88% 12.21% 6.22% 8.40%
Construction -0.23% 0.23% 2.01% 8.68% 5.36% 6.34%
Manufacturing -0.20% -0.01% 1.87% 7.43% 8.06% 10.21%
Transportion, Communication, Electric/Gas -0.31% -0.12% 2.16% 8.73% 9.95% 12.03%
Wholesale -0.12% 0.09% 2.03% 7.80% 7.30% 10.75%
Retail -0.26% -0.16% 1.46% 7.35% 9.31% 12.22%
Finance, Insurance, Real-Estate -0.13% 0.04% 1.32% 5.85% 6.42% 8.34%
Services -0.22% -0.08% 1.57% 7.09% 7.61% 9.67%
Public Administration 0.18% -0.12% 0.46% 0.67% 4.75% 4.64%
Energy -0.15% 0.34% 2.68% 12.05% 5.49% 8.06%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Yale-New Haven Hospital (USD) 2.496% 7/1/2050 (08/11/2020): 400MM Unsecured Notes, Price at Issuance 100, Yielding 2.5%.

2. Republic Services Inc. (USD) 1.45% 2/15/2031 (08/11/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.517, Yielding 1.5%.

3. Host Hotels & Resorts LP (USD) 3.5% 9/15/2030 (08/11/2020): 600MM Senior Unsecured Notes, Price at Issuance 98.702, Yielding 3.65%.

4. CNA Financial Corp. (USD) 2.05% 8/15/2030 (08/11/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.748, Yielding 2.08%.

5. Toyota Motor Credit Corp. (USD) 1.15% 8/13/2027 (08/11/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.953, Yielding 1.16%.

6. Toyota Motor Credit Corp. (USD) FLT% 2/14/2022 (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 100.

7. Toyota Motor Credit Corp. (USD) 0.5% 8/14/2023 (08/11/2020): 1400MM Senior Unsecured Notes, Price at Issuance 99.923, Yielding .53%.

8. Comcast Corp. (USD) 2.45% 8/15/2052 (08/11/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.21, Yielding 2.49%.

9. Brookfield Renewable Energy Partners (CAD) 3.33% 8/13/2050 (08/11/2020): 425MM Senior Unsecured Notes, Price at Issuance 99.925, Yielding 3.33%.

10. Bell Canada (CAD) 1.65% 8/16/2027 (08/11/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.993, Yielding 1.65%.

Additional Commentary

NEW ISSUANCE WATCH:  Republic Services Inc.  issued 1100 MM in notes.
Top Widening Loans Top Narrowing Loans
McClatchy Co. (USD) TLA 7.795% 07/15/2030
Excelitas Technologies Corp. (EUR) TL E+350 12/04/2024
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Coty Inc. (EUR) TLB E+250 04/05/2025
Mavenir Inc. (USD) TLB L+600 05/08/2025
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
TCW Group (USD) TLB L+175 12/27/2024
Tacala LLC (USD) TLB L+350 02/05/2027
Fleetpride Corp. (USD) TL L+450 12/19/2025

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 08/12/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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