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North American Bond Research – August 25, 2020

Posted on August 25, 2020
HIGH YIELD BOND RESEARCH
August 25, 2020
Bond Markets

CONSUMER CONFIDENCE FELL TO A SIX-YEAR LOW, SENDING MARKETS MOSTLY LOWER. TENSIONS BETWEEN THE WEST AND CHINA CONTINUE TO SIMMER. 10 Year Treasury notes were up .6 bps. S&P +0.35%, Dow –0.21%, NASDAQ +0.76%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24 MILLION+ CASES AND 821000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6 MILLION+ CASES AND 182000+ 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. 4.95% 7/1/2050 +0.0%
  United Rentals North AM 3.875% 2/15/2031 +0.5%
  Occidental Petroleum Corp. 3.5% 8/15/2029 +0.8%
  L Brands Inc. 6.75% 7/1/2036 +0.5%
  Occidental Petroleum Corp. 6.45% 9/15/2036 +0.7%
–   T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.0%
  Petrobras Global Finance BV 7.375% 1/17/2027 -0.4%
  Petrobras Global Finance BV 6.85% 6/5/2115 -0.5%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.5%
  Goldman Sachs Group Inc. 5% PERP -0.5%
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Petrobras Global Finance BV   7.375% 1/17/2027
Pacific Gas & Electric Co.   4.95% 7/1/2050
United Rentals North AM   3.875% 2/15/2031
Petrobras Global Finance BV   6.85% 6/5/2115
Pacific Gas & Electric Co.   4.55% 7/1/2030
Occidental Petroleum Corp.   3.5% 8/15/2029
Goldman Sachs Group Inc.   5% PERP
L Brands Inc.   6.75% 7/1/2036
GEO Group   5.125% 4/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.15% 0.04% 0.79% 5.81% 5.20% 9.07%
Mining 0.22% -0.18% 2.44% 16.69% -9.21% -5.11%
Construction 0.06% 0.17% 1.56% 7.90% 3.71% 7.03%
Manufacturing 0.13% 0.01% 1.10% 8.41% 1.79% 6.19%
Transportion, Communication, Electric/Gas 0.11% 0.03% 0.49% 5.29% 3.54% 6.28%
Wholesale 0.07% 0.02% 1.40% 7.57% 2.36% 6.28%
Retail 0.19% 0.46% 1.97% 10.30% 1.08% 4.82%
Finance, Insurance, Real-Estate 0.12% 0.24% 1.55% 9.18% 1.70% 5.02%
Services 0.14% 0.27% 1.37% 7.34% 2.43% 6.52%
Public Administration -0.27% 0.03% 2.52% 10.44% 5.72% 8.57%
Energy 0.22% -0.32% 2.37% 15.01% -7.18% -3.39%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. TreeHouse Foods Inc. (USD) 4% 9/1/2028 (08/25/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%. 1. Avianca : $1.3B DIP DD TLB

2. MAG Aerospace: $290.7MM TL (B3/B)

3. CJ Foods Inc.: $285MM TLB

4. Avianca : $1.3B DIP DD TLB

5. UPC/Sunrise: $2.4B term loans (B1/BB-/BB+): $1.2B TLB1; $1.2B TLB2

6. MAG Aerospace: $290.7MM TL (B3/B)

7. CJ Foods Inc.: $285MM TLB

8. CJ Foods Inc.: $285MM TLB

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

10. UPC/Sunrise: $2.4B term loans (B1/BB-/BB+): $1.2B TLB1; $1.2B TLB2

Additional Commentary

NEW ISSUANCE WATCH: TreeHouse Foods Inc. issued 500MM in notes.
Top Widening Loans Top Narrowing Loans
LSF9 Atlantis Holdings LLC (USD) TL L+600 05/01/2023
PDC Brands (USD) TLB L+475 06/29/2024
Globalfoundries Inc. (USD) TLB L+400 06/05/2026
Kindercare Education LLC (USD) TL L+825 08/16/2025
Douglas Holding AG (EUR) TLB7 E+350 08/13/2022
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Correct Care Solutions (USD) TL L+550 09/25/2025
Casper Bidco (EUR) TL E+850 07/30/2027
API Technologies Corp. (USD) TL L+425 05/09/2026

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 15 bp (basis points), as of 08/25/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
August 25, 2020
Bond Markets

CONSUMER CONFIDENCE FELL TO A SIX-YEAR LOW, SENDING MARKETS MOSTLY LOWER. TENSIONS BETWEEN THE WEST AND CHINA CONTINUE TO SIMMER. 10 Year Treasury notes were up .6 bps. S&P +0.35%, Dow –0.21%, NASDAQ +0.76%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24 MILLION+ CASES AND 821000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6 MILLION+ CASES AND 182000+ 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
+   Dupont de Nemours Inc. 2.169% 5/1/2023 +0.2%
  IBM Corp. 2.85% 5/13/2022 +0.1%
  Bank of America Corp. 4.3% PERP +2.9%
  Cisco Systems Inc. 2.2% 2/28/2021 +0.1%
  Teck Resources LTD 6.25% 7/15/2041 +0.9%
–   Johnson & Johnson 1.3% 9/1/2030 -0.3%
  Intercontinental Exchange Inc. 2.65% 9/15/2040 -0.2%
  AT&T Inc. 1.65% 2/1/2028 -0.5%
  Dow Chemical Co. 2.1% 11/15/2030 -0.3%
  Apple Inc. 1.65% 5/11/2030 -0.1%
Johnson & Johnson   1.3% 9/1/2030
Intercontinental Exchange Inc.   2.65% 9/15/2040
Dupont de Nemours Inc.   2.169% 5/1/2023
AT&T Inc.   1.65% 2/1/2028
Dow Chemical Co.   2.1% 11/15/2030
IBM Corp.   2.85% 5/13/2022
Apple Inc.   1.65% 5/11/2030
Wells Fargo & Co.   4.1% 6/3/2026
Alphabet Inc.   2.05% 8/15/2050
Bank of America Corp.   4.3% PERP
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.04% 0.38% 0.09% 7.79% 6.05% 6.59%
Construction -0.03% 0.22% 0.13% 6.51% 5.47% 5.58%
Manufacturing -0.09% 0.30% -0.41% 4.41% 7.17% 7.55%
Transportion, Communication, Electric/Gas -0.07% 0.16% -0.99% 5.33% 8.81% 8.90%
Wholesale -0.06% 0.20% 0.21% 5.88% 6.26% 8.35%
Retail -0.07% -0.33% -1.13% 3.89% 8.43% 9.24%
Finance, Insurance, Real-Estate -0.06% 0.13% 0.04% 4.19% 6.11% 6.86%
Services -0.07% 0.27% -0.42% 4.72% 6.74% 7.06%
Public Administration -0.25% -0.02% -0.17% 0.36% 4.35% 4.06%
Energy 0.06% -0.10% -0.02% 7.22% 5.08% 5.94%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Entergy Corp. (USD) 0.9% 9/15/2025 (08/24/2020): 800MM Senior Unsecured Notes, Price at Issuance 99.606, Yielding .98%.

2. Alabama Power Co. (USD) 1.45% 9/15/2030 (08/24/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.544, Yielding 1.5%.

3. Glencore Funding LLC (USD) 1.625% 9/1/2025 144A (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.499, Yielding 1.73%.

4. Glencore Funding LLC (USD) 2.5% 9/1/2030 144A (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.57, Yielding 2.55%.

5. Nationwide Building Society (USD) 1% 8/28/2025 Reg S (08/24/2020): 750MM Senior Preferred Security, Price at Issuance 99.859, Yielding 1.03%.

6. Glencore Funding LLC (USD) 2.5% 9/1/2030 Reg S (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.57, Yielding 2.55%.

7. Royalty Pharma (USD) 3.55% 9/2/2050 Reg S (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 95.306, Yielding 3.81%.

8. Glencore Funding LLC (USD) 1.625% 9/1/2025 Reg S (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.499, Yielding 1.73%.

9. Royalty Pharma (USD) 1.75% 9/2/2027 Reg S (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 98.284, Yielding 2.01%.

10. Royalty Pharma (USD) 2.2% 9/2/2030 Reg S (08/24/2020): 1000MM Senior Unsecured Notes, Price at Issuance 97.76, Yielding 2.45%.

Additional Commentary

NEW ISSUANCE WATCH: Entergy Corp. issued 800 MM in notes.
Top Widening Loans Top Narrowing Loans
LSF9 Atlantis Holdings LLC (USD) TL L+600 05/01/2023
PDC Brands (USD) TLB L+475 06/29/2024
Globalfoundries Inc. (USD) TLB L+400 06/05/2026
Kindercare Education LLC (USD) TL L+825 08/16/2025
Douglas Holding AG (EUR) TLB7 E+350 08/13/2022
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Correct Care Solutions (USD) TL L+550 09/25/2025
Casper Bidco (EUR) TL E+850 07/30/2027
API Technologies Corp. (USD) TL L+425 05/09/2026

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 08/24/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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