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North American Bond Research – December 20, 2019

Posted on December 20, 2019
HIGH YIELD BOND RESEARCH
December 20, 2019

Bond Markets


ON LIGHT VOLUME, STOCKS KEPT ON CLIMBING TO NEW HIGHS. SO FAR TRUMP’S IMPEACHMENT HAS BEEN LESS COSTLY THEN BILL CLINTON’S. The 10-year note gained .9 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
+   Rite Aid Corp. 6.125% 4/1/2023 144A + 0.8%
  Teva Pharmaceutical Industries LTD 7.125% 1/31/2025 144A + 0.4%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.1%
–   US Steel Corp. 6.875% 8/15/2025 -2.0%
  Tesla Motors Inc. 5.3% 8/15/2025 144A -0.2%
  Fibria Overseas Finance LTD 5.5% 1/17/2027 -0.8%
Calpine Corp.   5.125% 3/15/2028 144A
US Steel Corp.   6.875% 8/15/2025
Tesla Motors Inc.   5.3% 8/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.23% 0.70% 1.61% 3.22% 18.60% 18.48%
Mining 0.08% 2.48% 5.30% 0.14% 8.72% 7.22%
Construction -0.07% 0.11% 1.37% 2.49% 16.36% 15.63%
Manufacturing 0.03% 0.55% 1.89% 3.02% 13.47% 12.61%
Transportion, Communication, Electric/Gas 0.04% 0.61% 1.74% 1.63% 15.32% 14.31%
Wholesale 0.09% 0.91% 1.86% 1.69% 13.44% 12.22%
Retail 0.11% 0.75% 1.89% 1.78% 16.69% 15.53%
Finance, Insurance, Real-Estate 0.04% 0.55% 1.57% 2.56% 14.72% 13.85%
Services 0.00% 0.50% 1.60% 2.39% 13.87% 13.00%
Public Administration -0.18% 0.32% 0.88% 2.21% 14.74% 14.49%
Energy 0.07% 2.30% 4.89% 0.28% 9.11% 7.64%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 12/20/2019)
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 37 bp (basis points), as of 12/20/19
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
December 20, 2019

Bond Markets


ON LIGHT VOLUME, STOCKS KEPT ON CLIMBING TO NEW HIGHS. SO FAR TRUMP’S IMPEACHMENT HAS BEEN LESS COSTLY THEN BILL CLINTON’S. The 10-year note gained .9 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
+   Apple Inc. 2.85% 5/11/2024 + 0.1%
  CVS Health Corp. 5.05% 3/25/2048 + 0.3%
  Mizuho Bank 2.4% 3/26/2020 Reg S + 0.0%
–   Abbvie Inc. 4.25% 11/21/2049 144A -0.1%
  Royal Bank of Canada 2.15% 10/26/2020 -0.1%
  Cisco Systems Inc. 2.2% 2/28/2021 -0.1%
Abbvie Inc.   4.25% 11/21/2049 144A
CVS Health Corp.   5.05% 3/25/2048
Royal Bank of Canada   2.15% 10/26/2020
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.00% 0.29% 0.58% 1.36% 6.94% 7.24%
Mining 0.12% 0.47% 0.83% 1.14% 12.59% 12.32%
Construction 0.00% 0.10% 0.51% 1.59% 10.83% 10.85%
Manufacturing 0.08% 0.16% 0.44% 1.54% 11.68% 11.45%
Transportion, Communication, Electric/Gas 0.04% 0.18% 0.52% 1.58% 14.58% 14.38%
Wholesale 0.07% 0.26% 0.54% 1.91% 13.32% 12.94%
Retail 0.10% 0.19% 0.49% 1.49% 13.17% 12.85%
Finance, Insurance, Real-Estate 0.04% 0.15% 0.32% 1.38% 10.08% 10.24%
Services 0.06% 0.18% 0.30% 1.33% 11.12% 11.02%
Public Administration 0.06% 0.11% -0.01% 0.54% 4.77% 5.28%
Energy 0.13% 0.53% 1.07% 1.36% 13.34% 12.93%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 12/20/2019)

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)
Cable & Wireless Communication (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 37 bp (basis points), as of 12/20/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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