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North American Bond Research – August 28, 2020

Posted on August 28, 2020
HIGH YIELD BOND RESEARCH
August 28, 2020
Bond Markets

EUROPEAN MARKETS TANK WHILE US MARKETS GO UP AS THE FED STATES IT WILL LET INFLATION RUN HIGHER THAN 2% FOR EXTENDED PERIOD OF TIME. THIS MEANS THE MONEY SUPPLY WILL BE VERY CHEAP AND PLENTIFUL FOR A LONG TIME. 10 Year Treasury notes were up 6.3 bps. S&P +0.67%, Dow +0.57%, NASDAQ +0.60%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24.9 MILLION+ CASES AND 839000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.1 MILLION+ CASES AND 186000+ 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
+   TreeHouse Foods Inc. 4% 9/1/2028 +0.3%
  Valaris PLC 4.75% 1/15/2024 +8.8%
  L Brands Inc. 5.625% 10/15/2023 +0.9%
  Crown Castle Intl Corp. 5.25% 1/15/2023 +0.1%
  Hilton Worldwide Finance LLC 4.875% 4/1/2027 +0.4%
–   Petrobras Global Finance BV 7.375% 1/17/2027 -0.0%
  Sabine Pass Liquefaction LLC 5.625% 3/1/2025 -0.0%
  Cheniere Corpus Christi Hldgs LLC 5.125% 6/30/2027 -0.2%
  Frontier Communications Corp. 11% 9/15/2025 -1.7%
  Delta Airlines 7.375% 1/15/2026 -0.5%
Petrobras Global Finance BV   7.375% 1/17/2027
TreeHouse Foods Inc.   4% 9/1/2028
Sabine Pass Liquefaction LLC   5.625% 3/1/2025
Cheniere Corpus Christi Hldgs LLC   5.125% 6/30/2027
Valaris PLC   4.75% 1/15/2024
L Brands Inc.   5.625% 10/15/2023
Frontier Communications Corp.   11% 9/15/2025
Crown Castle Intl Corp.   5.25% 1/15/2023
Hilton Worldwide Finance LLC   4.875% 4/1/2027
Occidental Petroleum Corp.   6.625% 9/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% 0.41% 0.98% 5.60% 5.48% 9.20%
Mining 0.01% 0.43% 2.84% 14.68% -9.51% -5.43%
Construction 0.01% 0.34% 1.58% 7.45% 4.04% 6.88%
Manufacturing 0.02% 0.50% 1.29% 7.63% 1.95% 6.11%
Transportion, Communication, Electric/Gas -0.01% 0.33% 0.75% 4.61% 3.64% 6.21%
Wholesale -0.12% -1.12% -0.25% 4.65% -0.04% 3.23%
Retail -0.02% 0.72% 2.22% 8.74% 1.29% 4.65%
Finance, Insurance, Real-Estate -0.01% 0.41% 1.70% 8.27% 1.85% 5.02%
Services 0.03% 0.62% 1.73% 6.55% 1.88% 5.81%
Public Administration 0.11% 0.32% 2.82% 9.25% 6.08% 8.78%
Energy 0.02% 0.42% 2.63% 12.75% -7.78% -4.05%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 08/28/2020)
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
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
GGP Inc. (USD) TLB L+250 08/24/2025
Hanjin Intl. Corp. (USD) TLB L+250 09/20/2020
Hillman Group Inc. (USD) TLB L+350 05/21/2025
Crown Americas LLC (EUR) TLA E+150 12/13/2024
Deoleo SA (EUR) TL2 E+675 06/12/2022
Exclusive Group (EUR) TLB E+400 06/06/2025
Garrett Motion (USD) TLB L+250 09/27/2025
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 15 bp (basis points), as of 08/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
August 28, 2020
Bond Markets

EUROPEAN MARKETS TANK WHILE US MARKETS GO UP AS THE FED STATES IT WILL LET INFLATION RUN HIGHER THAN 2% FOR EXTENDED PERIOD OF TIME. THIS MEANS THE MONEY SUPPLY WILL BE VERY CHEAP AND PLENTIFUL FOR A LONG TIME. 10 Year Treasury notes were up 6.3 bps. S&P +0.67%, Dow +0.57%, NASDAQ +0.60%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 24.9 MILLION+ CASES AND 839000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.1 MILLION+ CASES AND 186000+ 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
+   Microsoft Corp. 2.525% 6/1/2050 +1.3%
  General Electric Co. 4.35% 5/1/2050 +0.3%
  Viacom Inc. 4.95% 1/15/2031 +0.2%
  Johnson & Johnson 2.1% 9/1/2040 +0.5%
  Johnson & Johnson 0.95% 9/1/2027 +0.2%
–   Johnson & Johnson 2.45% 9/1/2060 -0.5%
  Apple Inc. 2.55% 8/20/2060 -0.3%
  Verizon Communications Inc. 4.5% 8/10/2033 -0.0%
  CVS Health Corp. 5.05% 3/25/2048 -0.5%
  SSM Health Care Corp. 3.688% 6/1/2023 -0.4%
Johnson & Johnson   2.45% 9/1/2060
Microsoft Corp.   2.525% 6/1/2050
Apple Inc.   2.55% 8/20/2060
General Electric Co.   4.35% 5/1/2050
Viacom Inc.   4.95% 1/15/2031
Johnson & Johnson   2.1% 9/1/2040
Johnson & Johnson   0.95% 9/1/2027
Home Depot Inc.   3.35% 4/15/2050
Verizon Communications Inc.   4.5% 8/10/2033
CVS Health Corp.   3.875% 7/20/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.25% -0.34% -0.22% 6.65% 5.58% 5.93%
Construction -0.14% -0.31% -0.05% 4.71% 4.47% 4.44%
Manufacturing -0.22% -0.35% -0.75% 3.76% 6.74% 6.77%
Transportion, Communication, Electric/Gas -0.36% -0.63% -1.66% 4.49% 8.14% 7.74%
Wholesale -0.18% -0.28% -0.05% 5.03% 6.26% 8.21%
Retail -0.28% -0.56% -1.54% 3.13% 7.65% 8.12%
Finance, Insurance, Real-Estate -0.13% -0.18% -0.09% 3.68% 5.72% 6.31%
Services -0.17% -0.26% -0.64% 4.16% 6.18% 6.25%
Public Administration -0.05% -0.10% 0.27% 0.44% 4.62% 3.93%
Energy -0.23% -0.33% -0.38% 5.85% 4.66% 5.25%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Brookfield Infrastructure Finance ULC (CAD) 2.855% 9/1/2032 (08/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.86%.

2. Met Life Global Funding Inc. (USD) 0.45% 9/1/2023 144A (08/28/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.884, Yielding .49%.

3. Met Life Global Funding Inc. (USD) 0.45% 9/1/2023 Reg S (08/28/2020): 350MM Senior Unsecured Notes, Price at Issuance 350, Yielding -37.36%.

Additional Commentary

NEW ISSUANCE WATCH: Met Life Global Funding Inc. issued 750 MM in notes.
Top Widening Loans Top Narrowing Loans
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
GGP Inc. (USD) TLB L+250 08/24/2025
Hanjin Intl. Corp. (USD) TLB L+250 09/20/2020
Hillman Group Inc. (USD) TLB L+350 05/21/2025
Crown Americas LLC (EUR) TLA E+150 12/13/2024
Deoleo SA (EUR) TL2 E+675 06/12/2022
Exclusive Group (EUR) TLB E+400 06/06/2025
Garrett Motion (USD) TLB L+250 09/27/2025
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 15 bp (basis points), as of 08/28/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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