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North American Bond Research – February 11, 2020

Posted on February 11, 2020
HIGH YIELD BOND RESEARCH
February 11, 2020
Bond Markets

MARKETS EEKED OUT A GAIN. CORONAVIRUS AND REPO MARKET ACTIVITIES MAKE MARKET GAINS GRIND TO A SLIGHT GAIN.   S&P 10 year Treasury notes were down .5 basis points.  S&P +0.17%, Dow +0.01%, NASDAQ +0.11%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 43000+ CASES AND 1000+ DEATHS. INFECTION HAS SPREAD TO OVER 25 COUNTRIES WITH 1000+ CONFIRMED CASES, 5000+ STUCK ON CRUISE SHIPS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.125% 11/15/2023 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Sprint Capital Corp. 6.875% 11/15/2028 + 16.6%
  Charter Communications Operating LLC 4.8% 3/1/2050 + 0.0%
  Communications Sales & Leasing Inc. 8.25% 10/15/2023 + 2.1%
–   Goodyear Tire & Rubber Co. 4.875% 3/15/2027 -0.6%
  Charter Communications Operating LLC 5.05% 3/30/2029 -0.1%
  Micron Technology Inc. 4.64% 2/6/2024 -1.0%
Sprint Capital Corp.   6.875% 11/15/2028
Charter Communications Operating LLC   4.8% 3/1/2050
L Brands Inc.   6.875% 11/1/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.23% 0.39% 0.77% 3.34% 1.55% 18.42%
Mining -0.23% 0.03% -2.84% 1.89% -2.26% 2.43%
Construction 0.10% 0.50% 1.62% 3.21% 1.67% 13.58%
Manufacturing 0.07% 0.52% 0.87% 3.70% 1.44% 11.55%
Transportion, Communication, Electric/Gas 0.09% 0.61% 0.96% 3.18% 1.43% 12.77%
Wholesale 0.07% 0.30% 0.66% 3.25% 1.31% 10.50%
Retail 0.11% 0.46% 0.46% 3.01% 0.95% 12.80%
Finance, Insurance, Real-Estate 0.07% 0.37% 0.92% 2.95% 1.37% 11.82%
Services 0.08% 0.53% 0.75% 3.05% 1.14% 10.88%
Public Administration 0.12% 0.42% 1.02% 3.68% 1.60% 14.42%
Energy -0.16% -0.02% -2.30% 2.54% -1.55% 4.09%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. United Rentals North AM (USD) 4% 7/15/2030 (02/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

2. Valvoline Inc. (USD) 4.25% 2/15/2030 144A (02/10/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

3. APX Group Inc. (USD) 6.75% 2/15/2027 144A (02/11/2020): 600MM Secured Notes, Price at Issuance 100, Yielding 6.75%.

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 02/03/2020 participants welcome a $300MM new corporate-bond offering by
Castle US Holdings.  The most recent data showed money flowed in of ETF/mutual funds for the week ended 01/10/2020, with a net inflow of $9.8 billion.
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 16 bp (basis points), as of 02/11/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
February 11, 2020
Bond Markets

MARKETS EEKED OUT A GAIN. CORONAVIRUS AND REPO MARKET ACTIVITIES MAKE MARKET GAINS GRIND TO A SLIGHT GAIN.   S&P 10 year Treasury notes were down .5 basis points.  S&P +0.17%, Dow +0.01%, NASDAQ +0.11%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 43000+ CASES AND 1000+ DEATHS. INFECTION HAS SPREAD TO OVER 25 COUNTRIES WITH 1000+ CONFIRMED CASES, 5000+ STUCK ON CRUISE SHIP.  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,  Anheuser Busch Companies Inc (USD) 5.75% 4/1/2036  made analysts’ ‘Conviction Buy’ list. (See the chart below for Anheuser Busch Companies Inc bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   JP Morgan Chase & Co. 4.6% PERP + 0.5%
  Wells Fargo & Co. VAR% 2/11/2026 + 0.0%
  UnitedHealth Group Inc. 3.7% 8/15/2049 + 0.1%
–   Intel Corp. 3.25% 11/15/2049 -0.6%
  AT&T Inc. 4.5% 3/9/2048 -0.4%
  Wells Fargo & Co. VAR% 2/11/2031 -0.4%
Intel Corp.   3.25% 11/15/2049
AT&T Inc.   4.5% 3/9/2048
Wells Fargo & Co.   VAR% 2/11/2031
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.19% 0.19% 2.22% 3.84% 2.40% 5.76%
Mining 0.18% 0.17% 1.29% 3.87% 1.84% 11.73%
Construction 0.20% 0.28% 1.86% 3.74% 2.39% 10.50%
Manufacturing 0.18% 0.13% 1.84% 3.64% 2.21% 11.69%
Transportion, Communication, Electric/Gas 0.25% 0.20% 2.37% 4.72% 2.87% 15.34%
Wholesale 0.16% 0.11% 1.72% 3.60% 2.03% 13.49%
Retail 0.18% 0.15% 2.04% 3.85% 2.26% 13.30%
Finance, Insurance, Real-Estate 0.16% 0.07% 1.47% 2.93% 1.78% 10.25%
Services 0.20% 0.16% 1.84% 3.40% 2.13% 11.46%
Public Administration 0.05% -0.12% 0.76% 1.32% 0.87% 4.98%
Energy 0.18% 0.20% 1.38% 4.03% 1.78% 12.20%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Bank of Montreal (USD) 2.05% 2/13/2023 (02/10/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.05%.

2. Block Communications (USD) 4.875% 3/1/2028 (02/10/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

3. AvalonBay Communities Inc. (USD) 2.3% 3/1/2030 (02/10/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.893, Yielding 2.31%.

Additional Commentary

NEW ISSUANCE WATCH: on 02/03/2020 participants welcome a $1800MM new corporate-bond offering by Open Test CorpThe most recent data showed money flowed in of ETF/mutual funds for the week ended 01/10/2020, with a net inflow of $9.8 billion.
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 16 bp (basis points), as of 02/11/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

 

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