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North American Bond Research – December 12, 2019

Posted on December 12, 2019
HIGH YIELD BOND RESEARCH
December 12, 2019

Bond Markets


GLOBAL STOCK PRICES ARE UP ON TRUMP’S TWEET THAT A “BIG” CHINA DEAL IS VERY CLOSE. Trump wants to swap further tariffs and cuts in current tariffs in return for better access to China’s markets, intellectual property protection and increase purchases by China of US farm goods and other products.  The 10-year note gained 10.7 basis points. S&P +0.86%, Dow +0.79%, NASDAQ  +0.73%.
THE JUDICIARY COMMITTEE WOUND DOWN THE LAST DAY OF DELIBERATION BEFORE AN ANTICIPATED VOTE FOR IMPEACHMENT. A vote is expected probably in the next week from the committee before a full house vote takes place. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.625% 3/1/2097 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   CommScope Inc. 8.25% 3/1/2027 144A + 0.4%
  Staples Inc. 7.5% 4/15/2026 144A + 0.7%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.1%
–   Staples Inc. 10.75% 4/15/2027 144A -0.9%
  Petrobras Global Finance BV 8.75% 5/23/2026 -0.4%
  CCO Hldg LLC 4.75% 3/1/2030 144A -0.2%
CommScope Inc.   8.25% 3/1/2027 144A
Staples Inc.   10.75% 4/15/2027 144A
Pacific Gas & Electric Co.   6.05% 3/1/2034
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 0.80% 0.87% 2.68% 18.82% 19.59%
Mining 0.27% 1.30% 0.88% -2.00% 6.20% 3.66%
Construction 0.08% 0.34% 1.01% 2.27% 16.23% 15.53%
Manufacturing 0.07% 0.45% 1.31% 2.48% 12.79% 11.70%
Transportion, Communication, Electric/Gas 0.14% 0.42% 0.86% 1.09% 14.16% 12.85%
Wholesale 0.03% 0.43% 0.61% 1.00% 12.78% 11.58%
Retail 0.01% 0.19% 0.31% 0.87% 13.63% 11.87%
Finance, Insurance, Real-Estate 0.09% 0.40% 0.84% 2.04% 14.17% 13.18%
Services 0.06% 0.45% 0.91% 1.93% 13.34% 12.07%
Public Administration 0.22% 0.42% 0.95% 2.05% 14.86% 16.15%
Energy 0.30% 1.37% 1.07% -1.54% 6.95% 4.86%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 12/12/2019)
1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

3. Diamondback Energy Inc.: High-yield notes, Expected Q4 2019

Additional Commentary


NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1175MM new corporate-bond offering by Wolverine Ecrow The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 Million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Weatherford International LTD (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD CR14)
Ghana, Republic of (5Y Sen USD CR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)

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 33 bp (basis points), as of 12/12/19
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
December 12, 2019

Bond Markets


GLOBAL STOCK PRICES ARE UP ON TRUMP’S TWEET THAT A “BIG” CHINA DEAL IS VERY CLOSE. Trump wants to swap further tariffs and cuts in current tariffs in return for better access to China’s markets, intellectual property protection and increase purchases by China of US farm goods and other products.  The 10-year note gained 10.7 basis points. S&P +0.86%, Dow +0.79%, NASDAQ  +0.73%.
THE JUDICIARY COMMITTEE WOUND DOWN THE LAST DAY OF DELIBERATION BEFORE AN ANTICIPATED VOTE FOR IMPEACHMENT. A vote is expected probably in the next week from the committee before a full house vote takes place. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bondsHigh-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,  CVS Caremark Corp. (USD) 5.75% 5/15/2041  made analysts’ ‘Conviction Buy’ list. (See the chart below for CVS Caremark Corp. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Shell Intl. Finance BV 2.25% 11/10/2020 + 0.2%
  Nutrien LTD 5% 4/1/2049 + 1.3%
  Enterprise Products Operating LLC 5.25% 8/16/2077 + 0.5%
–   IBM Corp. 3.5% 5/15/2029 -0.3%
  Abbvie Inc. 3.2% 11/21/2029 144A -0.8%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 -0.5%
IBM Corp.   3.5% 5/15/2029
Abbvie Inc.   3.2% 11/21/2029 144A
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.06% 0.22% 0.62% 1.48% 6.17% 6.38%
Mining 0.28% 0.21% 1.41% 1.26% 12.70% 13.64%
Construction 0.19% 0.19% 1.42% 1.57% 10.28% 10.99%
Manufacturing 0.21% 0.19% 1.43% 1.81% 11.90% 12.48%
Transportion, Communication, Electric/Gas 0.24% 0.21% 1.79% 1.84% 14.85% 15.93%
Wholesale 0.19% 0.25% 1.22% 2.05% 13.43% 13.94%
Retail 0.23% 0.20% 1.45% 1.63% 13.39% 13.89%
Finance, Insurance, Real-Estate 0.15% 0.10% 0.97% 1.47% 10.21% 11.12%
Services 0.19% 0.14% 1.20% 1.52% 11.61% 12.38%
Public Administration 0.12% 0.04% 0.40% 0.44% 4.62% 5.59%
Energy 0.29% 0.32% 1.51% 1.41% 13.12% 13.92%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 12/12/2019)

Additional Commentary


NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1000MM new corporate-bond offering by
Nationwide Financial Service. The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 Million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Weatherford International LTD (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD CR14)
Ghana, Republic of (5Y Sen USD CR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)

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 33 bp (basis points), as of 12/12/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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