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North American Bond Research – December 1, 2020

Posted on December 1, 2020
HIGH YIELD BOND RESEARCH
December 1, 2020
Bond Markets

GLOBAL MARKETS WERE UP SOLIDLY ON NEWS THAT A BI-PARTISAN SENATE GROUP ARE PUSHING $908 BILLION IN AID TO INDIVIDUALS, BUSINESSES AND CASH STRAPPED STATES. 10 Year Treasury notes were DOWN .1 bps. S&P +1.13%, Dow +0.63%, NASDAQ +1.28%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 64.1 MILLION+ CASES AND 1.485 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.1 MILLION+ CASES AND 276000+ 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
+   Transocean Sedco Forex Inc. 7.5% 4/15/2031 +1.8%
  Cheniere Energy Inc. 5.25% 10/1/2025 (1) +0.4%
  Service Properties Trust 7.5% 9/15/2025 +0.6%
  Sprint Nextel Corp. 7.875% 9/15/2023 +0.0%
  Service Properties Trust 5.5% 12/15/2027 +1.1%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.2%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.2%
  HCA Inc. 5.25% 4/15/2025 -0.0%
  Kraft Heinz Co. 4.375% 6/1/2046 (2) -0.3%
  Lennar Corp. 4.75% 11/29/2027 -0.1%
Pacific Gas & Electric Co.   4.55% 7/1/2030
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Transocean Sedco Forex Inc.   7.5% 4/15/2031
HCA Inc.   5.25% 4/15/2025
Kraft Heinz Co.   4.375% 6/1/2046 (2)
Lennar Corp.   4.75% 11/29/2027
Cheniere Energy Inc.   5.25% 10/1/2025 (1)
Service Properties Trust   7.5% 9/15/2025
Firstenergy Corp.   7.375% 11/15/2031
Sprint Nextel Corp.   7.875% 9/15/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.05% 0.28% 1.94% 1.67% 7.96% 9.85%
Mining 0.23% 1.55% 9.69% 52.83% -5.21% -1.73%
Construction 0.05% 0.30% 2.34% 3.53% 8.81% 9.87%
Manufacturing 0.07% 0.44% 3.49% 4.07% 6.45% 8.10%
Transportion, Communication, Electric/Gas 0.09% 0.35% 2.80% 4.51% 6.21% 7.77%
Wholesale -0.01% 0.22% 2.67% 2.28% 4.37% 6.40%
Retail 0.04% 0.69% 3.52% 4.33% 6.14% 7.74%
Finance, Insurance, Real-Estate -0.02% 0.24% 2.73% 3.16% 5.71% 7.18%
Services 0.02% 0.38% 4.22% 3.58% 5.83% 7.88%
Public Administration -0.07% -0.15% 1.65% 2.70% 9.12% 10.55%
Energy 0.20% 1.56% 9.58% 46.22% -3.41% 0.53%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. H&E Equipment Services Inc. (USD) 3.875% 12/15/2028 144A (11/30/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

2. LifePoint Health Inc (USD) 5.375% 1/15/2029 144A (11/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.38%.

3. H&E Equipment Services Inc. (USD) 3.875% 12/15/2028 Reg S (11/30/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

4. LifePoint Health Inc (USD) 5.375% 1/15/2029 Reg S (11/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.38%.

1. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

2. American Bath Group LLC: $1.2B TL (B2/B)

3. American Public Education Inc.: $195MM credit facilities: $20MM revolver; $175MM TLB

4. Astoria Energy LLC: $800MM TLB (Ba3)

5. Railworks: $280MM credit facilities: $230MM TLB; $50MM revolver

6. Smartbear: $565MM credit facilities: $50MM revolver (B2/B-); $385MM TL (B2/B-); $130MM TL

7. Sinclair: $550MM senior secured notes

8. American Bath: $335MM senior unsecured notes (Caa2/CCC+)

9. Carnival: $1000MM senior unsecured notes (B2/B)

10. Double Eagle: $650MM senior unsecured notes (B3/B)

Additional Commentary

NEW ISSUANCE WATCH: H&E Equipment Services Inc. ISSUED 1250MM in notes.
Top Widening Loans Top Narrowing Loans
GIP III Stetson I (USD) TLB L+425 07/18/2025
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Allsup’s (USD) TLB L+625 11/18/2024
MFG / MRH (GBP) TL2 06/21/2026
Air Methods Corp. (USD) TL L+350 04/13/2024
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Applied Systems Inc. (USD) TLB L+300 09/18/2024
Casper Bidco (EUR) TL E+850 07/30/2027
Alpha AB Bidco (USD) TL 09/10/2026

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 bps (basis points), as of 12/01/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
December 1, 2020
Bond Markets

GLOBAL MARKETS WERE UP SOLIDLY ON NEWS THAT A BI-PARTISAN SENATE GROUP ARE PUSHING $908 BILLION IN AID TO INDIVIDUALS, BUSINESSES AND CASH STRAPPED STATES. 10 Year Treasury notes were DOWN .1 bps. S&P +1.13%, Dow +0.63%, NASDAQ +1.28%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 64.1 MILLION+ CASES AND 1.485 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.1 MILLION+ CASES AND 276000+ 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
+   Enterprise Products Operating LLC 5.375% 2/15/2078 +0.7%
  Oracle Corp. 2.95% 4/1/2030 +0.4%
  Boeing Co. 2.75% 2/1/2026 +0.3%
  Broadcom LTD 4.15% 11/15/2030 +0.5%
  PSEG Power LLC 8.625% 4/15/2031 +0.1%
–   Verizon Communications Inc. 2.875% 11/20/2050 -1.0%
  Verizon Communications Inc. 3% 11/20/2060 -1.3%
  General Electric Co. FLT% PERP (1) -2.3%
  Wells Fargo & Co. VAR% 4/4/2031 -0.3%
  Anheuser-Busch Inbev Worldwide Inc. 4.5% 6/1/2050 -1.0%
Verizon Communications Inc.   2.875% 11/20/2050
Verizon Communications Inc.   3% 11/20/2060
General Electric Co.   FLT% PERP (1)
Wells Fargo & Co.   VAR% 4/4/2031
Anheuser-Busch Inbev Worldwide Inc.   4.5% 6/1/2050
Bristol-Myers Squibb Co.   1.45% 11/13/2030
Boeing Co.   5.805% 5/1/2050
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Bank of America Corp.   4.083% 3/20/2051
Enterprise Products Operating LLC   5.375% 2/15/2078
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.29% 0.42% 2.81% 2.38% 8.18% 8.86%
Construction 0.05% 0.15% 2.15% 3.61% 9.23% 9.37%
Manufacturing 0.14% 0.10% 1.80% 2.14% 9.23% 9.60%
Transportion, Communication, Electric/Gas 0.12% 0.10% 2.29% 2.19% 10.53% 10.78%
Wholesale 0.05% 0.12% 1.97% 2.94% 9.72% 10.49%
Retail 0.23% 0.14% 2.13% 2.51% 10.76% 11.18%
Finance, Insurance, Real-Estate 0.09% 0.09% 1.32% 1.74% 8.03% 8.51%
Services 0.17% 0.16% 1.66% 1.88% 8.40% 8.68%
Public Administration -0.16% 0.10% 0.03% 0.19% 4.92% 4.97%
Energy 0.26% 0.42% 3.12% 2.35% 7.04% 8.20%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. H&R Real Estate Investment Trust (CAD) 2.906% 6/2/2026 (11/30/2020): 250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.91%.

2. McKesson Corp. (USD) 0.9% 12/3/2025 (11/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.961, Yielding .91%.

3. UDR Inc. (USD) 1.9% 3/15/2033 (11/30/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.578, Yielding 1.94%.

4. Consolidated Edison Inc. (USD) 0.65% 12/1/2023 (11/30/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.982, Yielding .66%.

5. Bank of New York Mellon, The (USD) 0.35% 12/7/2023 (11/30/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.893, Yielding .39%.

6. National Secs Clearing (USD) 0.4% 12/7/2023 144A (11/30/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.875, Yielding .44%.

7. Banco Santander SA (USD) 2.749% 12/3/2030 (11/30/2020): 1500MM Subordinated Notes, Price at Issuance 100, Yielding 2.75%.

8. National Secs Clearing (USD) 0.75% 12/7/2025 Reg S (11/30/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.677, Yielding .82%.

9. National Secs Clearing (USD) 0.4% 12/7/2023 Reg S (11/30/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.875, Yielding .44%.

10. Barclays Bank PLC (USD) 0.39% 2/17/2021 (11/30/2020): 89MM Senior Unsecured Notes, Price at Issuance 100, Yielding .39%.

Additional Commentary

NEW ISSUANCE WATCH:      H&R Real Estate Investment Trust  issued 250 MM in notes. 
Top Widening Loans Top Narrowing Loans
GIP III Stetson I (USD) TLB L+425 07/18/2025
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Allsup’s (USD) TLB L+625 11/18/2024
MFG / MRH (GBP) TL2 06/21/2026
Air Methods Corp. (USD) TL L+350 04/13/2024
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Applied Systems Inc. (USD) TLB L+300 09/18/2024
Casper Bidco (EUR) TL E+850 07/30/2027
Alpha AB Bidco (USD) TL 09/10/2026

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 bps (basis points), as of 12/01/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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