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North American Bond Research – August 27, 2020

Posted on August 27, 2020
HIGH YIELD BOND RESEARCH
August 27, 2020
Bond Markets

MARKETS MIXED TO DOWN AS ANOTHER MILLION AMERICANS FILE FOR 1ST TIME UNEMPLOYMENT. COVID 19 VACCINES MAY REQUIRE ULTRA LOW-TEMPERATURE STORAGE RAISING DISTRIBUTION CONCERNS. 10 Year Treasury notes were up 6.3 bps. S&P +0.17%, Dow +0.57%, NASDAQ -0.34%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24.6 MILLION+ CASES AND 833000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6 MILLION+ CASES AND 185000+ 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
+   TransDigm Group Inc. 6.5% 5/15/2025 Reg S +0.5%
  CBL & Associates LP 4.6% 10/15/2024 +4.7%
  Delta Airlines 7.375% 1/15/2026 +2.1%
  United Rentals North AM 3.875% 2/15/2031 +0.1%
  CBL & Associates LP 5.25% 12/1/2023 +3.6%
–   T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.5%
  General Motors Co. 5.2% 4/1/2045 -1.1%
  Enbridge Inc. VAR% 3/1/2089 -0.0%
  Petrobras Global Finance BV 7.375% 1/17/2027 -0.1%
  Teva Pharmaceuticals Fin BV 6.75% 3/1/2028 -0.1%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
General Motors Co.   5.2% 4/1/2045
Enbridge Inc.   VAR% 3/1/2089
Petrobras Global Finance BV   7.375% 1/17/2027
TransDigm Group Inc.   6.5% 5/15/2025 Reg S
Teva Pharmaceuticals Fin BV   6.75% 3/1/2028
CBL & Associates LP   4.6% 10/15/2024
Delta Airlines   7.375% 1/15/2026
United Rentals North AM   3.875% 2/15/2031
Vale Overseas LTD   3.75% 7/8/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.00% 0.20% 0.93% 5.68% 5.33% 9.16%
Mining 0.04% -0.07% 3.11% 16.23% -9.69% -5.55%
Construction 0.06% 0.28% 1.84% 7.97% 3.93% 7.23%
Manufacturing 0.05% 0.40% 1.12% 8.09% 1.88% 6.17%
Transportion, Communication, Electric/Gas -0.01% 0.29% 0.62% 4.94% 3.69% 6.27%
Wholesale -0.02% 0.04% 1.16% 6.85% 1.70% 5.16%
Retail 0.05% 0.65% 2.36% 9.82% 1.25% 4.91%
Finance, Insurance, Real-Estate -0.00% 0.37% 1.99% 9.52% 1.24% 4.38%
Services 0.06% 0.51% 1.64% 7.04% 1.75% 5.71%
Public Administration -0.08% 0.12% 2.72% 9.95% 5.96% 8.99%
Energy 0.04% 0.00% 2.67% 14.00% -7.82% -3.96%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 08/27/2020)
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: No New Issues.
Top Widening Loans Top Narrowing Loans
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
NN Inc. (USD) TLB L+375 10/19/2022
US Telepacific Corp. (USD) TLB L+500 04/17/2023
Keter Group BV (EUR) TLB E+425 10/31/2023
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Verifone Inc. (USD) TL L+400 08/20/2025
American Gaming Systems (USD) TL L+1300 02/15/2024
Logoplaste (EUR) TLB E+400 10/31/2023

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 08/27/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
August 26, 2020
Bond Markets

GOOD NEWS ON THE VACCINE FRONT, STRONG EARNINGS AND TENSIONS LESSENING BETWEEN CHINA AND USA DROVE GLOBAL MARKETS HIGHER. 10 Year Treasury notes were up .6 bps. S&P +1.02%, Dow +0.3%, NASDAQ +1.73%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24 MILLION+ CASES AND 828000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6 MILLION+ CASES AND 183000+ 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
+   JP Morgan Chase & Co. 4.35% 8/15/2021 +0.1%
  Johnson & Johnson 1.3% 9/1/2030 +0.0%
  Union Pacific Corp. 4.25% 4/15/2043 +0.5%
  Banco Santander SA 2.746% 5/28/2025 +0.1%
  AT&T Inc. 3.5% 2/1/2061 +0.1%
–   Johnson & Johnson 2.1% 9/1/2040 -0.3%
  Intercontinental Exchange Inc. 3% 9/15/2060 -0.2%
  Alphabet Inc. 2.05% 8/15/2050 -0.2%
  Nike Inc. 3.375% 3/27/2050 -0.3%
  Southwest Airlines Co. 5.125% 6/15/2027 -0.1%
JP Morgan Chase & Co.   4.35% 8/15/2021
Johnson & Johnson   2.1% 9/1/2040
Intercontinental Exchange Inc.   3% 9/15/2060
Johnson & Johnson   1.3% 9/1/2030
Union Pacific Corp.   4.25% 4/15/2043
Alphabet Inc.   2.05% 8/15/2050
Banco Santander SA   2.746% 5/28/2025
Nike Inc.   3.375% 3/27/2050
AT&T Inc.   3.5% 2/1/2061
Southwest Airlines Co.   5.125% 6/15/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.03% 0.24% 0.09% 7.92% 6.12% 6.65%
Construction -0.19% 0.06% 0.12% 6.85% 6.16% 6.19%
Manufacturing 0.00% 0.14% -0.39% 4.37% 7.13% 7.54%
Transportion, Communication, Electric/Gas -0.09% 0.11% -1.02% 5.29% 8.69% 8.75%
Wholesale -0.02% 0.12% 0.19% 5.86% 6.52% 8.59%
Retail -0.05% 0.09% -1.12% 3.87% 8.18% 8.97%
Finance, Insurance, Real-Estate 0.01% 0.08% 0.04% 4.22% 6.09% 6.83%
Services -0.01% 0.13% -0.30% 4.74% 6.34% 6.73%
Public Administration 0.25% 0.08% 0.06% 0.62% 4.80% 4.22%
Energy -0.04% 0.18% -0.10% 7.23% 5.05% 5.93%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. MassMutual Global Funding II (USD) 0.48% 8/28/2023 144A (08/25/2020): 400MM Secured Notes, Price at Issuance 100, Yielding .48%.

2. MassMutual Global Funding II (USD) 0.48% 8/28/2023 Reg S (08/25/2020): 400MM Secured Notes, Price at Issuance 100, Yielding .48%.

3. Equitable Financial Life (USD) 1.4% 8/27/2027 144A (08/25/2020): 500MM Secured Notes, Price at Issuance 99.768, Yielding 1.43%.

4. PRICOA Global Funding I (USD) 0.8% 9/1/2025 144A (08/25/2020): 400MM Secured Notes, Price at Issuance 99.79, Yielding .84%.

5. PRICOA Global Funding I (USD) 0.8% 9/1/2025 Reg S (08/25/2020): 400MM Secured Notes, Price at Issuance 99.79, Yielding .84%.

6. Equitable Financial Life (USD) 1.4% 8/27/2027 Reg S (08/25/2020): 500MM Secured Notes, Price at Issuance 99.768, Yielding 1.43%.

7. First Capital Real Estate Investment Trust (CAD) 3.447% 3/1/2028 (08/25/2020): 200MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.45%.

8. Hyatt Hotels Corp. (USD) FLT% 9/1/2022 (08/26/2020): 750MM Senior Unsecured Notes, Price at Issuance 100.

9. Catholic Health Services Of Long Island Obligated Group (USD) 3.368% 7/1/2050 (08/26/2020): 400MM Secured Notes, Price at Issuance 100, Yielding 3.37%.

10. University of Chicago (USD) 2.547% 4/1/2050 (08/26/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding 2.55%.

Additional Commentary

NEW ISSUANCE WATCH: MassMutual Global Funding II issued 400 MM in notes.
Top Widening Loans Top Narrowing Loans
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
GGP Inc. (USD) TLB L+250 08/24/2025
American Gaming Systems (USD) TL L+1300 02/15/2024
Crown Americas LLC (EUR) TLA E+150 12/13/2024
Safe Fleet Acquisition Corp. (USD) TL L+675 02/01/2026
Hillman Group Inc. (USD) TLB L+350 05/21/2025
LSF9 Atlantis Holdings LLC (USD) TL L+600 05/01/2023
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Mavenir Inc. (USD) TLB L+600 05/08/2025
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025

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 08/26/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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