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North American Bond Research – December 5, 2019

Posted on December 5, 2019
HIGH YIELD BOND RESEARCH
December 5, 2019

Bond Markets


ALTHOUGH CHINA AND THE US SAY TALKS ARE CLOSE TO CREATING PHASE 1 OF A TRADE DEAL, INVESTORS ARE NOT REACTING UNTIL SOMETHING CONCRETE COMES OUT ONE WAY OR ANOTHER. HOUSE IS IN THE PROCESS OF DRAFTING THE ARTICLES OF IMPEACHMENT. The 10-year note gained 1.6 basis points. S&P +0.15%, Dow  +0.10%, NASDAQ +0.05%.
PRESIDENT TRUMP FORMALLY ASKED THE SUPREME COURT TO REVIEW BOTH THE CONGRESS AND NEW YORK’S REQUEST FOR TAX RETURNS. These requests are based on the President’s former attorney Michael Cohen’s assertions that Trump manipulated his taxes.  High-yield edged out high-yield. 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
+   Diamond Sports Group, LLC 6.625% 8/15/2027 144A + 1.6%
  Chesapeake Energy Corp. 8% 1/15/2025 + 2.9%
  US Steel Corp. 6.875% 8/15/2025 + 0.4%
–   Chemours Co. LLC 7% 5/15/2025 -2.1%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -1.5%
  Michaels Stores Inc. 8% 7/15/2027 144A -4.0%
Petrobras Global Finance BV   6.85% 6/5/2115
Expedia Inc.   3.8% 2/15/2028 (1)
Diamond Sports Group, LLC   6.625% 8/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.09% 0.20% 0.39% 2.31% 17.68% 18.24%
Mining 0.34% -0.15% -0.64% -1.39% 5.53% 2.64%
Construction 0.16% 0.34% 0.59% 1.98% 15.31% 14.29%
Manufacturing 0.16% 0.24% 0.91% 2.20% 12.61% 11.11%
Transportion, Communication, Electric/Gas 0.06% 0.04% -0.28% 0.67% 12.88% 11.27%
Wholesale 0.21% 0.11% -0.09% 0.46% 11.77% 10.01%
Retail 0.22% 0.22% -0.05% 1.67% 15.43% 12.81%
Finance, Insurance, Real-Estate 0.07% 0.13% 0.45% 1.60% 13.57% 12.27%
Services 0.12% 0.16% 0.55% 1.86% 12.95% 11.41%
Public Administration 0.22% 0.12% 0.65% 1.14% 14.39% 15.42%
Energy 0.23% -0.18% -0.80% -1.79% 5.88% 3.52%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Twitter Inc. (USD) 3.875% 12/15/2027 144A (12/05/2019): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

2. Twitter Inc. (USD) 3.875% 12/15/2027 Reg S (12/05/2019): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

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

3. DDM Holding AG: ¬100MM, 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 35 bp (basis points), as of 12/05/19
  • Net negative capital flows into high-yield ETFs & mutual funds

INVESTMENT GRADE BOND RESEARCH
December 5, 2019

Bond Markets


ALTHOUGH CHINA AND THE US SAY TALKS ARE CLOSE TO CREATING PHASE 1 OF A TRADE DEAL, INVESTORS ARE NOT REACTING UNTIL SOMETHING CONCRETE COMES OUT ONE WAY OR ANOTHER. HOUSE IS IN THE PROCESS OF DRAFTING THE ARTICLES OF IMPEACHMENT. The 10-year note gained 1.6 basis points. S&P +0.15%, Dow  +0.10%, NASDAQ +0.05%.
PRESIDENT TRUMP FORMALLY ASKED THE SUPREME COURT TO REVIEW BOTH THE CONGRESS AND NEW YORK’S REQUEST FOR TAX RETURNS. These requests are based on the President’s former attorney Michael Cohen’s assertions that Trump manipulated his taxes. 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
+   Wells Fargo Bank NA 2.6% 1/15/2021 + 0.0%
  Abbvie Inc. 2.95% 11/21/2026 144A + 0.1%
  Anheuser-Busch Inbev Worldwide Inc. 4.75% 1/23/2029 + 0.1%
–   Goldman Sachs Group Inc. VAR% 4/23/2029 -0.2%
  Starbucks Corp. 4.5% 11/15/2048 -0.7%
  IBM Corp. 4.25% 5/15/2049 -0.2%
Goldman Sachs Group Inc.   VAR% 4/23/2029
Starbucks Corp.   4.5% 11/15/2048
IBM Corp.   4.25% 5/15/2049
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.00% 0.04% 0.43% 1.00% 6.11% 6.37%
Mining -0.15% 0.06% 0.47% -0.27% 12.51% 13.59%
Construction -0.14% 0.08% 0.50% 0.12% 9.98% 10.87%
Manufacturing -0.19% 0.11% 0.65% 0.31% 11.42% 12.22%
Transportion, Communication, Electric/Gas -0.26% 0.05% 0.73% -0.14% 14.58% 15.98%
Wholesale -0.16% 0.07% 0.56% 0.71% 13.56% 13.99%
Retail -0.27% 0.15% 0.59% 0.03% 13.06% 13.86%
Finance, Insurance, Real-Estate -0.16% 0.12% 0.50% 0.34% 10.31% 11.43%
Services -0.21% 0.09% 0.56% 0.11% 11.58% 12.62%
Public Administration -0.09% 0.03% 0.09% -0.26% 4.63% 5.77%
Energy -0.21% 0.08% 0.44% -0.36% 12.81% 13.76%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Ameris Bank (USD) 4.25% 12/15/2029 (12/04/2019): 120MM Subordinated Notes, Price at Issuance 100, Yielding 4.25%.

2. Trinity Health (USD) 3.434% 12/1/2048 (12/04/2019): 301MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.43%.

3. Global Aircraft Leasing Co., LTD (USD) 6.5% 9/15/2024 (12/04/2019): 200MM Senior Unsecured Notes.

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 12/05/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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