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North American Bond Research – December 3, 2020

Posted on December 3, 2020
HIGH YIELD BOND RESEARCH
December 3, 2020
Bond Markets

GLOBAL MARKETS WERE MIXED TO UP, AS COVID DEATHS AND CASES SPIKED AGAIN. OPEC AND RUSSIA AGREED TO INCREASE PRODUCTION BY 500,000 BARRELS, OIL ENDED AT 45.69. 10 Year Treasury notes were UP 1.4 bps. S&P -0.06%, Dow +0.29%, NASDAQ +0.23%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 65.4 MILLION+ CASES AND 1.51 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.5 MILLION+ CASES AND 282000+ 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
+   Vale Overseas LTD 6.25% 8/10/2026 +0.0%
  Pacific Gas & Electric Co. 4.3% 3/15/2045 +0.9%
  Syngenta Finance NV 4.892% 4/24/2025 Reg S +0.9%
  Syngenta Finance NV 5.182% 4/24/2028 Reg S +1.6%
  Broadcom LTD 4.25% 4/15/2026 +0.2%
–   Citigroup Inc. 6.125% PERP -0.7%
  Cinemark Inc. 4.875% 6/1/2023 -1.8%
  Citigroup Inc. 5.95% PERP (1) -0.0%
  Freeport-McMoRan Inc. 4.625% 8/1/2030 -0.5%
  Lennar Corp. 4.75% 11/29/2027 -0.1%
Vale Overseas LTD   6.25% 8/10/2026
Pacific Gas & Electric Co.   4.3% 3/15/2045
Syngenta Finance NV   4.892% 4/24/2025 Reg S
Syngenta Finance NV   5.182% 4/24/2028 Reg S
Broadcom LTD   4.25% 4/15/2026
General Motors Co.   5.2% 4/1/2045
Broadcom LTD   4.7% 4/15/2025
Vale Overseas LTD   3.75% 7/8/2030
Citigroup Inc.   6.125% PERP
US Steel Corp.   6.875% 8/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.14% 0.11% 1.84% 1.20% 8.06% 10.03%
Mining 0.16% 0.82% 9.69% 49.01% -3.56% 0.21%
Construction -0.03% 0.16% 2.35% 3.69% 9.12% 10.26%
Manufacturing 0.01% 0.31% 3.16% 3.58% 6.88% 8.37%
Transportion, Communication, Electric/Gas -0.01% 0.24% 2.81% 3.54% 6.21% 7.80%
Wholesale 0.04% 0.19% 2.65% 1.64% 3.99% 6.05%
Retail 0.09% 0.47% 3.82% 3.92% 6.23% 8.18%
Finance, Insurance, Real-Estate -0.02% 0.29% 2.90% 3.10% 5.76% 7.26%
Services 0.06% 0.28% 4.06% 2.91% 6.10% 8.12%
Public Administration -0.34% 0.13% 1.46% 2.61% 9.35% 10.85%
Energy 0.17% 0.84% 9.33% 41.55% -1.78% 2.15%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Credit Suisse Group AG (USD) VAR% PERP Reg S (12/02/2020): 1500MM Junior Subordinated Notes, Price at Issuance 100.

2. Calpine Corp. (USD) 3.75% 3/1/2031 Reg S (12/02/2020): 900MM Secured Notes, Price at Issuance 100, Yielding 3.75%.

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

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

3. Zaxby’s Operating Co LP: $975MM credit facilities: $100MM revolver; $625MM TLB; $250MM TL

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

5. Service King Collision Repair Centers: $700MM TLB

6. Cano Health LLC: $685MM credit facilities: $30MM revolver; $480MM TL; $175MM DD

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

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

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

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

Additional Commentary

NEW ISSUANCE WATCH: Credit Suisse Group AG  ISSUED 1500MM in notes.
Top Widening Loans Top Narrowing Loans
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Aernnova Aerospace SA (EUR) TLB E+300 01/31/2027
Gestamp Automocion (EUR) TL 01/23/2025
EG Group (EUR) TL E+775 03/23/2026
Aptean Inc. (USD) TL L+850 04/24/2027
Applied Industrial Tech. (USD) TLA 12/31/2049
Distributed Power Inc. (EUR) TL E+800 11/02/2026
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Dental Corp. (USD) TL2 L+750 06/06/2026

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 15 bps (basis points), as of 12/03/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
December 3, 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 65.4 MILLION+ CASES AND 1.51 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.5 MILLION+ CASES AND 282000+ 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
+   Boeing Co. 5.805% 5/1/2050 +1.8%
  Verizon Communications Inc. 3% 11/20/2060 +0.4%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 +1.1%
  Owl Rock Capital Corp. 3.4% 7/15/2026 +1.4%
  BP Capital Markets America Inc. 2.939% 6/4/2051 +1.0%
–   Harley-Davidson Inc. 4.625% 7/28/2045 -0.7%
  Credit Suisse New York 2.1% 11/12/2021 -0.2%
  Intel Corp. 4.6% 3/25/2040 -0.3%
  Abbvie Inc. 3.2% 11/21/2029 144A -0.0%
  Citigroup Inc. 4.7% PERP -1.7%
Boeing Co.   5.805% 5/1/2050
Verizon Communications Inc.   3% 11/20/2060
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Owl Rock Capital Corp.   3.4% 7/15/2026
BP Capital Markets America Inc.   2.939% 6/4/2051
Harley-Davidson Inc.   4.625% 7/28/2045
Verizon Communications Inc.   2.875% 11/20/2050
Barclays Bank PLC   1.7% 5/12/2022
Boeing Co.   3.625% 2/1/2031
General Motors Financial Co. Inc.   3.6% 6/21/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.07% 0.30% 3.25% 1.92% 8.28% 9.46%
Construction -0.31% -0.05% 2.54% 3.46% 8.29% 8.99%
Manufacturing -0.22% 0.04% 1.89% 1.49% 9.27% 9.98%
Transportion, Communication, Electric/Gas -0.31% 0.06% 2.56% 1.50% 10.67% 11.48%
Wholesale -0.06% 0.17% 2.08% 2.54% 9.96% 10.97%
Retail -0.29% 0.06% 2.31% 1.84% 10.63% 11.45%
Finance, Insurance, Real-Estate -0.17% 0.02% 1.33% 1.29% 7.94% 8.60%
Services -0.19% 0.11% 1.75% 1.32% 8.65% 9.26%
Public Administration -0.05% -0.02% 0.36% 0.36% 5.05% 5.16%
Energy -0.10% 0.37% 3.74% 1.86% 7.25% 8.89%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. NorthShore Re LTD (USD) FLT% 1/8/2024 (12/02/2020): 150MM Unsecured Notes, Price at Issuance 100.

2. Consumers Energy Co. (USD) 0.35% 6/1/2023 (12/02/2020): 300MM First Lien Notes, Price at Issuance 99.966, Yielding .36%.

3. Albertsons Cos Safeway (USD) 3.5% 3/15/2029 (12/02/2020): 600MM Senior Unsecured Notes, Price at Issuance 99, Yielding 3.64%.

4. Granite REIT Holdings LP (CAD) 2.378% 12/18/2030 (12/02/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.38%.

Additional Commentary

NEW ISSUANCE WATCH:       NorthShore Re LTD  issued 150 MM in notes. 
Top Widening Loans Top Narrowing Loans
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Aernnova Aerospace SA (EUR) TLB E+300 01/31/2027
Gestamp Automocion (EUR) TL 01/23/2025
EG Group (EUR) TL E+775 03/23/2026
Aptean Inc. (USD) TL L+850 04/24/2027
Applied Industrial Tech. (USD) TLA 12/31/2049
Distributed Power Inc. (EUR) TL E+800 11/02/2026
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Dental Corp. (USD) TL2 L+750 06/06/2026

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 15 bps (basis points), as of 12/03/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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