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North American Bond Research – January 10,2020

Posted on January 10, 2020
INVESTMENT GRADE BOND RESEARCH
January 10, 2020

Bond Markets


EQUITY AND BONDS RECEDE FROM THE IRANIAN STRIKE GAINES. WHERE DO WE GO FROM HERE?  10-year note lost 3.3 basis points. S&P -0.29%, Dow -0.46%, NASDAQ -0.27%.
STOCKS AND BONDS WERE MIXED TODAY. JOB REPORTS WERE MIXED AS WELL AS WAGE GROWTH WAS SLOWEST IN 18 MONTHS. 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
+   Bank of America Corp. VAR% 2/7/2030 + 0.1%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 + 2.4%
  Visa Inc. 2.2% 12/14/2020 + 0.0%
–   Wells Fargo Bank NA 2.6% 1/15/2021 -0.1%
  General Electric Co. FLT% PERP (1) -0.7%
  Morgan Stanley FLT% 1/20/2022 -0.0%
Bank of America Corp.   VAR% 2/7/2030
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Visa Inc.   2.2% 12/14/2020
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.13% 0.25% 1.48% 1.15% 0.27% 6.80%
Mining -0.13% 0.48% 1.74% 0.95% 0.63% 13.50%
Construction -0.03% 0.55% 1.07% 0.80% 0.65% 10.83%
Manufacturing -0.10% 0.38% 0.84% 0.78% 0.51% 12.03%
Transportion, Communication, Electric/Gas -0.10% 0.61% 1.19% 0.73% 0.82% 15.36%
Wholesale -0.12% 0.33% 1.06% 1.38% 0.46% 14.89%
Retail -0.16% 0.36% 0.90% 0.55% 0.54% 13.57%
Finance, Insurance, Real-Estate -0.05% 0.32% 0.71% 0.76% 0.41% 10.39%
Services -0.09% 0.31% 0.73% 0.50% 0.43% 11.31%
Public Administration -0.02% 0.17% 0.41% -0.17% 0.23% 4.81%
Energy -0.12% 0.51% 1.91% 1.13% 0.66% 14.43%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. MassMutual Global Funding II (USD) 2.35% 1/14/2027 144A (01/09/2020): 550MM Secured Notes, Price at Issuance 99.782, Yielding 2.38%.

2. MedStar Health Inc. (USD) 3.626% 8/15/2049 (01/09/2020): 302MM Secured Notes, Price at Issuance 100, Yielding 3.63%.

3. Athene Global Funding (USD) 2.55% 1/14/2025 144A (01/09/2020): 625MM Guaranteed Senior Secured Notes, Price at Issuance 99.753.

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 31 bp (basis points), as of 01/10/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

 

HIGH YIELD BOND RESEARCH
January 10, 2020

Bond Markets


STOCK MARKETS RALLIED TO FRESH HIGHS AS THE CONFLICT WITH IRAN SEEMED TO PULL BACK FROM CONFRONTATION. 10-year note lost 1.6 basis points. S&P +0.67%, Dow  +0.78%, NASDAQ  +0.81%.
A NUMBER OF ANALYST HAVE STATED THAT THESE NEW HIGHS HAVE ONLY A BASIS IN A CONFLICT BEING AVERTED. They feel the markets are too frothy and warn of a correction. 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
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 2.1%
  Petrobras Global Finance BV 6.85% 6/5/2115 + 1.8%
  AMC Entertainment Hldg Inc. 5.75% 6/15/2025 + 0.4%
–   Nabors Industries Inc. 5.75% 2/1/2025 -0.6%
  Intl Lease Finance Corp. 8.25% 12/15/2020 -0.2%
  US Steel Corp. 6.875% 8/15/2025 -1.9%
Pacific Gas & Electric Co.   6.05% 3/1/2034
Petrobras Global Finance BV   6.85% 6/5/2115
Nabors Industries Inc.   5.75% 2/1/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% 0.57% 1.84% 3.44% 0.52% 20.45%
Mining 0.29% 1.21% 6.26% 5.32% 1.23% 8.86%
Construction 0.08% 0.17% 0.87% 2.63% 0.19% 16.02%
Manufacturing 0.06% 0.27% 1.48% 3.70% 0.36% 13.28%
Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.36% 14.42%
Wholesale 0.12% 0.43% 1.82% 2.78% 0.49% 13.02%
Retail 0.09% 0.23% 1.81% 2.88% 0.28% 16.07%
Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.59% 0.32% 13.77%
Services 0.06% 0.22% 1.34% 2.92% 0.28% 13.25%
Public Administration -0.38% -0.17% 1.18% 2.41% 0.04% 14.91%
Energy 0.24% 1.12% 6.20% 4.69% 1.15% 9.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Range Resources Corp. (USD) 9.25% 2/1/2026 144A (01/09/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 9.25%.

2. Genesis Energy LP (USD) 7.75% 2/1/2028 (01/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.75%.

(None Current 01/10/2020)
1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

3. EMPTY PLACEHOLDER: EMPTY

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 31 bp (basis points), as of 01/09/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

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