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North American Bond Research – February 20, 2020

Posted on February 20, 2020
HIGH YIELD BOND RESEARCH
February 20, 2020
Bond Markets
THE SEESAW OF VIEWS AND OUTLOOKS SEEMS TO SHOW THE MARKETS ARE ONCE AGAIN LEARY AS TO WHAT THE CORONAVIRUS FINANCIAL EFFECT COULD BE ON THE WORLD’S ECONOMY.  10 year Treasury notes were up 1.4 basis points.  S&P -0.39%, Dow -0.44%, NASDAQ -0.67%.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 76000+ CASES AND 2100+ DEATHS. THE VIRUS SEEMS TO BE SLOWING DOWN AS NEW CASES AND DEATHS SEEM TO BE DECELERATING.  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
+   L Brands Inc. 6.875% 11/1/2035 + 0.2%
  Petrobras Global Finance BV 6.85% 6/5/2115 + 0.8%
  Comstock Resources Inc. 9.75% 8/15/2026 + 4.5%
–   L Brands Inc. 6.75% 7/1/2036 -0.9%
  Communications Sales & Leasing Inc. 8.25% 10/15/2023 -0.7%
  Antero Resources Finance Corp. 5.375% 11/1/2021 -0.1%
L Brands Inc.   6.875% 11/1/2035
L Brands Inc.   6.75% 7/1/2036
L Brands Inc.   7.5% 6/15/2029
Petrobras Global Finance BV   6.85% 6/5/2115
Comstock Resources Inc.   9.75% 8/15/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.05% 0.39% 0.78% 3.92% 1.98% 18.38%
Mining -0.02% -0.32% -3.24% 2.36% -2.65% 1.84%
Construction 0.02% 0.27% 1.61% 3.68% 2.11% 13.56%
Manufacturing -0.01% 0.35% 0.90% 4.09% 1.97% 11.52%
Transportion, Communication, Electric/Gas -0.00% 0.38% 1.47% 4.76% 2.47% 13.05%
Wholesale -0.04% 0.17% 0.01% 3.33% 1.51% 9.46%
Retail -0.02% 0.20% 0.50% 3.79% 1.33% 12.45%
Finance, Insurance, Real-Estate -0.01% 0.26% 0.75% 3.48% 1.75% 11.59%
Services -0.02% 0.24% 0.47% 3.42% 1.51% 10.66%
Public Administration 0.14% 1.08% 2.02% 4.44% 2.33% 13.31%
Energy -0.04% -0.25% -2.45% 2.87% -1.74% 3.58%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Tallgrass Energy Partners LP (USD) 6% 3/1/2027 144A (02/19/2020): 430MM Senior Unsecured Notes, Price at Issuance 98.591, Yielding 6.25%.

2. Tallgrass Energy Partners LP (USD) 6% 3/1/2027 Reg S (02/19/2020): 430MM Senior Unsecured Notes, Price at Issuance 98.591, Yielding 6.25%.

3. MSCI Inc. (USD) 3.625% 9/1/2030 Reg S (02/19/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.63%.

4. MSCI Inc. (USD) 3.625% 9/1/2030 144A (02/19/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.63%.

5. Freeport-McMoRan Inc. (USD) 4.125% 3/1/2028 (02/19/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

 1. EMPTY PLACEHOLDER: EMPTY
Additional Commentary
NEW ISSUANCE WATCH: on 02/13/2020 participants welcome a $475MM new corporate-bond offering by
Hecla Mining Co.  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 13 bp (basis points), as of 02/20/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

INVESTMENT GRADE BOND RESEARCH
February 20, 2020
Bond Markets
THE SEESAW OF VIEWS AND OUTLOOKS SEEMS TO SHOW THE MARKETS ARE ONCE AGAIN LEARY AS TO WHAT THE CORONAVIRUS FINANCIAL EFFECT COULD BE ON THE WORLD’S ECONOMY.  10 year Treasury notes were up 1.4 basis points.  S&P -0.39%, Dow -0.44%, NASDAQ -0.67%.

CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 76000+ CASES AND 2100+ DEATHS. THE VIRUS SEEMS TO BE SLOWING DOWN AS NEW CASES AND DEATHS SEEM TO BE DECELERATING. (Advantage Data Inc.). Extensive corporate-bond index data showed a net daily grade increment for high-grade versus high-yield constituents. High-yield bonds edged out high-grade debt as of 3 PM, London time.  Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,  Bombardier Inc. (USD) 7.5% 12/1/2024 Reg S made some analysts ‘Conviction buy’ lists. (See the chart for Bombardier Inc. bonds below). Pierre Robert
Key Gainers and Losers Volume Leaders
+   Bank of America Corp. 2.496% 2/13/2031 + 0.3%
  Novartis Capital Corp. 2.75% 8/14/2050 + 0.2%
  AT&T Inc. 4.5% 3/9/2048 + 0.2%
  Kraft Heinz Co. 4.375% 6/1/2046 (2) + 0.0%
  Citigroup Inc. 2.666% 1/29/2031 + 0.1%
–   Anheuser-Busch Inbev Worldwide Inc. 5.55% 1/23/2049 -0.6%
  AT&T Inc. 4.55% 3/9/2049 -1.5%
  Conagra Brands Inc. 5.4% 11/1/2048 -1.9%
Bank of America Corp.   2.496% 2/13/2031
Anheuser-Busch Inbev Worldwide Inc.   5.55% 1/23/2049
Novartis Capital Corp.   2.75% 8/14/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.07% 0.06% 1.99% 3.79% 2.65% 5.77%
Mining 0.11% 0.53% 1.43% 3.54% 2.26% 12.14%
Construction 0.05% 0.44% 1.99% 3.60% 3.02% 11.92%
Manufacturing 0.05% 0.34% 1.62% 3.07% 2.37% 11.92%
Transportion, Communication, Electric/Gas 0.09% 0.52% 2.12% 3.92% 3.13% 15.57%
Wholesale 0.06% 0.08% 1.41% 3.12% 2.18% 13.86%
Retail 0.07% 0.37% 1.86% 3.20% 2.42% 13.18%
Finance, Insurance, Real-Estate 0.04% 0.28% 1.35% 2.54% 1.97% 10.43%
Services 0.05% 0.35% 1.64% 2.85% 2.29% 11.47%
Public Administration 0.01% 0.06% 0.65% 0.95% 0.86% 4.74%
Energy 0.11% 0.58% 1.55% 3.70% 2.18% 12.50%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Mizuho Financial Group Inc. (USD) 2.591% 5/25/2031 (02/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.59%.

2. Mizuho Financial Group Inc. (USD) 2.226% 5/25/2026 (02/19/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.23%.

3. Citigroup Global Markets (USD) 2.65% 3/9/2030 (02/19/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.65%.

4. Banque Fed du Credit Mutuel (EUR) FLT% 2/24/2022 (02/19/2020): 593MM Senior Unsecured Notes.
Additional Commentary
NEW ISSUANCE WATCH: on 02/03/2020 participants welcome a $400MM new corporate-bond offering by Floodsmart. 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 13 bp (basis points), as of 02/19/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

 

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