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North American Bond Research – January 14, 2020

Posted on January 14, 2020
HIGH YIELD BOND RESEARCH
January 14, 2020

Bond Markets


EQUITY MARKETS ARE MIXED TO LOWER BECAUSE THE US HAS STATED THAT CURRENT TARIFFS ARE NOT TO CHANGE TIL AT LEAST AFTER THE 2020 ELECTIONS. S&P -0.15%, Dow  +0.11%, NASDAQ  -0.24%.
THE FED SAID ON TUESDAY IT WOULD CONDUCT REPURCHASE AGREEMENT OPERATIONS THROUGH AT LEAST FEB 13BUT IT WOULD TRIM THE AMOUNT TO $30 BILLION FROM $35 BILLION.  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
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.9%
  Southwestern Energy Co. 7.5% 4/1/2026 + 0.8%
  L Brands Inc. 6.875% 11/1/2035 + 1.7%
–   Intelsat Jackson Hldg SA 5.5% 8/1/2023 (1) -0.5%
  T-Mobile USA Inc. 4.75% 2/1/2028 -0.1%
  Ally Financial Inc. 3.875% 5/21/2024 -0.0%
Intelsat Jackson Hldg SA   5.5% 8/1/2023 (1)
Pacific Gas & Electric Co.   6.05% 3/1/2034
Southwestern Energy Co.   7.5% 4/1/2026
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% 0.59% 20.45%
Mining 0.29% 1.21% 6.26% 5.31% 1.30% 8.85%
Construction 0.08% 0.17% 0.87% 2.63% 0.26% 16.02%
Manufacturing 0.06% 0.27% 1.47% 3.69% 0.43% 13.26%
Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.42% 14.42%
Wholesale 0.12% 0.43% 1.82% 2.78% 0.56% 13.02%
Retail 0.09% 0.23% 1.81% 2.88% 0.35% 16.07%
Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.58% 0.39% 13.76%
Services 0.06% 0.22% 1.34% 2.93% 0.35% 13.26%
Public Administration -0.38% -0.17% 1.18% 2.41% 0.11% 14.91%
Energy 0.24% 1.12% 6.20% 4.68% 1.21% 9.54%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/14/2020)
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 01/10/2020 participants welcome a $1000MM new corporate-bond offering by
Loredo Petroleum.  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)
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 01/14/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 14, 2020

Bond Markets


EQUITY MARKETS ARE MIXED TO LOWER BECAUSE THE US HAS STATED THAT CURRENT TARIFFS ARE NOT TO CHANGE TIL AT LEAST AFTER THE 2020 ELECTIONS. 10-year note lost 3.3 S&P -0.15%, Dow  +0.11%, NASDAQ  -0.24%.
THE FED SAID ON TUESDAY IT WOULD CONDUCT REPURCHASE AGREEMENT OPERATIONS THROUGH AT LEAST FEB 13BUT IT WOULD TRIM THE AMOUNT TO $30 BILLION FROM $35 BILLION. 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,  Anadarko Petroleum Corp. (USD) 4.5% 7/15/2044  made analysts’ ‘Conviction Buy’ list. (See the chart below for Anadarko Petroleum Corp. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 0.4%
  GE Capital Corp. 5.875% 1/14/2038 + 0.5%
  JP Morgan Chase & Co. 2.739% 10/15/2030 + 0.1%
–   Rabobank Nederland 3.875% 2/8/2022 -0.0%
  AT&T Inc. 4.5% 3/9/2048 -0.5%
  Energy Transfer Partners LP 6.25% 4/15/2049 -0.4%
CVS Health Corp.   5.05% 3/25/2048
Rabobank Nederland   3.875% 2/8/2022
AT&T Inc.   4.5% 3/9/2048
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% 0.32% 6.80%
Mining -0.13% 0.48% 1.74% 0.95% 0.68% 13.50%
Construction -0.03% 0.55% 1.07% 0.80% 0.70% 10.83%
Manufacturing -0.10% 0.38% 0.84% 0.78% 0.56% 12.03%
Transportion, Communication, Electric/Gas -0.10% 0.61% 1.19% 0.73% 0.87% 15.35%
Wholesale -0.12% 0.33% 1.06% 1.38% 0.51% 14.89%
Retail -0.17% 0.36% 0.91% 0.55% 0.59% 13.72%
Finance, Insurance, Real-Estate -0.05% 0.32% 0.71% 0.76% 0.45% 10.39%
Services -0.09% 0.31% 0.73% 0.50% 0.47% 11.31%
Public Administration -0.02% 0.17% 0.41% -0.17% 0.26% 4.81%
Energy -0.12% 0.51% 1.91% 1.13% 0.71% 14.43%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Brookfield Properties Pty LTD (CAD) 3.93% 1/15/2027 (01/13/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.93%.

2. Portland General Electric Co. (USD) 3.34% 10/25/2049 (01/13/2020): 110MM Secured Notes.

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

Additional Commentary


NEW ISSUANCE WATCH: on 01/13/2020 participants welcome a $1600MM new corporate-bond offering by
Novelis Inc. 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 31 bp (basis points), as of 01/14/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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