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North American Bond Research – January 13, 2020

Posted on January 13, 2020
INVESTMENT GRADE BOND RESEARCH
January 13, 2020

Bond Markets


TENSIONS WITH IRAN SEEM TO LESSEN AND CHINA’S TRADE DEAL IS BEING SIGNED THIS WEEK. MARKETS AGAIN HIT ALL-TIME HIGH! 10-year note lost 3.3 10-year note gained 2.3 basis points. S&P +0.70%, Dow  +0.29%, NASDAQ  +1.04%.
BRITISH POUND FELL BELOW $1.30 BASED ON ANTICIPATED RATE CUT IN THE COMING MONTHS. EXPERT CONTINUE TO STATE THAT A BREXIT DEAL WITH EU WILL TAKE UP TO 2 YEARS. 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
+   Ecopetrol SA 4.125% 1/16/2025 + 1.2%
  Bank of America Corp. FLT% 3/5/2024 + 0.0%
  Wells Fargo Bank NA 3.625% 10/22/2021 + 0.1%
–   CVS Health Corp. 5.05% 3/25/2048 -1.0%
  Bank of America Corp. VAR% 2/7/2030 -0.2%
  JPMorgan Chase & Co. 4.25% 10/1/2027 -0.2%
CVS Health Corp.   5.05% 3/25/2048
Bank of America Corp.   VAR% 2/7/2030
JPMorgan Chase & Co.   4.25% 10/1/2027
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% 0.28% 6.80%
Mining -0.13% 0.48% 1.74% 0.95% 0.64% 13.50%
Construction -0.03% 0.55% 1.07% 0.80% 0.67% 10.83%
Manufacturing -0.10% 0.38% 0.84% 0.78% 0.53% 12.03%
Transportion, Communication, Electric/Gas -0.10% 0.61% 1.19% 0.73% 0.83% 15.36%
Wholesale -0.12% 0.33% 1.06% 1.38% 0.47% 14.89%
Retail -0.16% 0.36% 0.90% 0.55% 0.55% 13.57%
Finance, Insurance, Real-Estate -0.05% 0.32% 0.71% 0.76% 0.42% 10.39%
Services -0.09% 0.31% 0.73% 0.50% 0.44% 11.31%
Public Administration -0.02% 0.17% 0.41% -0.17% 0.24% 4.81%
Energy -0.12% 0.51% 1.91% 1.13% 0.67% 14.43%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Portland General Electric Co. (USD) 3.34% 10/25/2049 (01/13/2020): 110MM Secured Notes.

2. Toronto-Dominion Bank (USD) 1.9% 1/17/2022 (01/13/2020): 0MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.9%.

3. Bank of Nova Scotia (CAD) FLT% 1/13/2021 (01/13/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100.

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 31 bp (basis points), as of 01/13/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

 

HIGH YIELD BOND RESEARCH
January 13, 2020

Bond Markets


TENSIONS WITH IRAN SEEM TO LESSEN AND CHINA’S TRADE DEAL IS BEING SIGNED THIS WEEK. MARKETS AGAIN HIT ALL-TIME HIGH! 10-year note lost 3.3 10-year note gained 2.3 basis points. S&P +0.70%, Dow  +0.29%, NASDAQ  +1.04%.
BRITISH POUND FELL BELOW $1.30 BASED ON ANTICIPATED RATE CUT IN THE COMING MONTHS. EXPERT CONTINUE TO STATE THAT A BREXIT DEAL WITH EU WILL TAKE UP TO 2 YEARS. 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 + 2.8%
  Petrobras Global Finance BV 6.85% 6/5/2115 + 0.1%
  Hertz Corp. 6% 1/15/2028 144A + 0.9%
–   American Airlines Group Inc. 5% 6/1/2022 144A -0.3%
  General Motors Co. 5.2% 4/1/2045 -0.0%
  Ally Financial Inc. 3.875% 5/21/2024 -0.1%
Pacific Gas & Electric Co.   6.05% 3/1/2034
American Airlines Group Inc.   5% 6/1/2022 144A
Ally Financial Inc.   3.875% 5/21/2024
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% 0.54% 20.45%
Mining 0.29% 1.21% 6.26% 5.32% 1.25% 8.86%
Construction 0.08% 0.17% 0.87% 2.63% 0.21% 16.02%
Manufacturing 0.06% 0.27% 1.48% 3.70% 0.38% 13.28%
Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.37% 14.42%
Wholesale 0.12% 0.43% 1.82% 2.78% 0.51% 13.02%
Retail 0.09% 0.23% 1.81% 2.88% 0.30% 16.07%
Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.59% 0.34% 13.77%
Services 0.06% 0.22% 1.34% 2.92% 0.30% 13.25%
Public Administration -0.38% -0.17% 1.18% 2.41% 0.06% 14.91%
Energy 0.24% 1.12% 6.20% 4.69% 1.16% 9.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/13/2020)
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 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 01/13/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

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