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North American Bond Research – December 19, 2019

Posted on December 19, 2019
HIGH YIELD BOND RESEARCH
December 19, 2019

Bond Markets


DONALD TRUMP WAS IMPEACHED ON 2 ARTICLES OF IMPEACHMENT. FIRST ARTICLE WAS ABUSE OF POWER AND SECOND ARTICLE WAS OBSTRUCTING CONGRESS. The 10-year note LOST 1.6 basis points. S&P +0.45%, Dow +0.49%, NASDAQ  +0.67%.
SCOTLAND IS PRESSING TO HAVE AN INDEPENDENCE VOTE FROM THE UK. Scotland overwhelmingly wanted to stay with the EU. Brexit doubters also feel no deal will be reached by the UK, causing economic harm. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Level 3 Financing Inc. (USD) 5.375% 8/15/2022 made analysts’ ‘Conviction Buy’ list. (See the chart below for Level 3 Financing Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   APX Group Inc. 8.75% 12/1/2020 + 3.3%
  General Motors Co. 6.25% 10/2/2043 + 0.7%
  United States STL Corp. New 6.25% 3/15/2026 + 1.9%
–   Beazer Homes USA Inc. 5.875% 10/15/2027 -0.5%
  Alliance One Intl Inc. 9.875% 7/15/2021 -8.0%
  Petrobras Global Finance BV 6.85% 6/5/2115 -1.3%
APX Group Inc.   8.75% 12/1/2020
General Motors Co.   6.25% 10/2/2043
Beazer Homes USA Inc.   5.875% 10/15/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.04% 0.57% 1.62% 3.39% 19.49% 19.59%
Mining 0.26% 2.73% 3.97% -0.46% 8.75% 6.76%
Construction 0.04% 0.26% 1.43% 2.52% 16.48% 15.66%
Manufacturing 0.09% 0.63% 1.65% 3.03% 13.51% 12.46%
Transportion, Communication, Electric/Gas 0.04% 0.59% 1.65% 1.64% 14.55% 13.35%
Wholesale 0.12% 0.67% 1.21% 1.27% 12.56% 11.20%
Retail 0.14% 0.87% 1.57% 2.06% 16.68% 15.07%
Finance, Insurance, Real-Estate 0.05% 0.51% 1.39% 2.55% 14.83% 13.80%
Services 0.04% 0.58% 1.46% 2.35% 13.72% 12.65%
Public Administration 0.22% 0.07% 0.98% 2.52% 14.95% 14.84%
Energy 0.23% 2.49% 3.87% -0.17% 9.09% 7.22%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 12/19/2019)
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)
SuperValu Inc. (5Y Sen USD MR14)

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

 

INVESTMENT GRADE BOND RESEARCH
December 19, 2019

Bond Markets


DONALD TRUMP WAS IMPEACHED ON 2 ARTICLES OF IMPEACHMENT. FIRST ARTICLE WAS ABUSE OF POWER AND SECOND ARTICLE WAS OBSTRUCTING CONGRESS. The 10-year note LOST 1.6 basis points. S&P +0.45%, Dow +0.49%, NASDAQ  +0.67%.
SCOTLAND IS PRESSING TO HAVE AN INDEPENDENCE VOTE FROM THE UK. Scotland overwhelmingly wanted to stay with the EU. Brexit doubters also feel no deal will be reached by the UK, causing economic harm.  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
+   Energy Transfer Partners LP 5.3% 4/15/2047 + 0.0%
  Wells Fargo Bank NA 2.6% 1/15/2021 + 0.0%
  General Electric Co. FLT% PERP (1) + 18.3%
–   Wal-Mart Stores Inc. 1.9% 12/15/2020 -0.1%
  Visa Inc. 2.2% 12/14/2020 -0.1%
  IBM Corp. 4.25% 5/15/2049 -0.2%
Energy Transfer Partners LP   5.3% 4/15/2047
Wells Fargo Bank NA   2.6% 1/15/2021
Wal-Mart Stores Inc.   1.9% 12/15/2020
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.05% 0.29% 0.71% 1.44% 6.92% 7.06%
Mining -0.05% 0.12% 0.96% 1.23% 12.68% 12.70%
Construction -0.09% -0.23% 0.72% 1.68% 11.16% 11.51%
Manufacturing -0.12% -0.26% 0.47% 1.59% 11.30% 11.31%
Transportion, Communication, Electric/Gas -0.17% -0.28% 0.69% 1.71% 14.47% 14.70%
Wholesale -0.12% -0.10% 0.54% 1.93% 13.74% 13.53%
Retail -0.15% -0.29% 0.51% 1.51% 12.95% 12.94%
Finance, Insurance, Real-Estate -0.08% -0.15% 0.34% 1.39% 9.82% 10.22%
Services -0.13% -0.24% 0.36% 1.48% 11.51% 11.60%
Public Administration -0.02% -0.15% -0.06% 0.44% 4.58% 5.21%
Energy -0.06% 0.12% 1.08% 1.38% 13.11% 12.98%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 12/19/2019)

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

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