North American Bond Research – January 15, 2020

EQUITY MARKETS HELD ON TO GAINS FOR THE CHINA/USA PHASE 1 SIGNING. SUBSTANTIAL TARIFFS REMAIN AS US/CHINA STARTS PHASE 2 OF TRADE AGREEMENT.  S&P +0.19%, Dow  +0.31%, NASDAQ  +0.08%.

Key Gainers and Losers	Volume Leaders
+   General Motors Co. 6.25% 10/2/2043 + 0.3%   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.1%   Southwestern Energy Co. 7.5% 4/1/2026 + 1.8% –   Chemours Co. LLC 7% 5/15/2025 -2.1%   Frontier Communications Corp. 10.5% 9/15/2022 -0.4%   Antero Resources Corp. 5% 3/1/2025 -0.7%	General Motors Co.   6.25% 10/2/2043 Pacific Gas & Electric Co.   6.05% 3/1/2034 Chemours Co. LLC   7% 5/15/2025

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% 0.61% 20.45% Mining 0.29% 1.21% 6.26% 5.31% 1.32% 8.85% Construction 0.08% 0.17% 0.87% 2.63% 0.27% 16.02% Manufacturing 0.06% 0.27% 1.47% 3.69% 0.44% 13.26% Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.44% 14.43% Wholesale 0.12% 0.43% 1.82% 2.78% 0.58% 13.02% Retail 0.09% 0.23% 1.81% 2.88% 0.37% 16.07% Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.58% 0.41% 13.76% Services 0.06% 0.22% 1.34% 2.93% 0.37% 13.26% Public Administration -0.38% -0.17% 1.18% 2.41% 0.13% 14.91% Energy 0.24% 1.12% 6.20% 4.68% 1.23% 9.54%   Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
(None Current 01/15/2020)	1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019 2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

NEW ISSUANCE WATCH: on 01/13/2020 participants welcome a $250MM new corporate-bond offering by
Ashton Woods.  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)

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 29 bp (basis points), as of 01/15/2020
• Net negative capital flows into high-yield ETFs & mutual funds

EQUITY MARKETS HELD ON TO GAINS FOR THE CHINA/USA PHASE 1 SIGNING. SUBSTANTIAL TARIFFS REMAIN AS US/CHINA STARTS PHASE 2 OF TRADE AGREEMENT.  S&P +0.19%, Dow  +0.31%, NASDAQ  +0.08%.

TRADE DISPUTE IS BREWING BETWEEN THE EU AND USA NOW THAT PHASE 1 OF CHINA/US IS BEING SIGNED. THE US IS THREATENING TO LEVY $2.4 BILLION IN TARIFFS BECAUSE FRANCE IS CONSIDERING LEVYING A DIGITAL TAX, WHICH THE USA BELIEVES DISPORPORTIONALLY HITS US COMPANIES.  ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,  Kraft Foods Inc. (USD) 6.5% 2/9/2040  made analysts’ ‘Conviction Buy’ list. (See the chart below for Kraft Foods Inc. bonds) Pierre Robert

Key Gainers and Losers	Volume Leaders
+   Assurant Inc. 3.7% 2/22/2030 + 0.7%   Diageo Capital PLC 2.125% 10/24/2024 + 0.1%   3M Co. 4% 9/14/2048 + 0.1% –   Home Depot Inc. 3.125% 12/15/2049 -1.2%   AT&T Inc. 5.25% 3/1/2037 -0.2%   KeyCorp. 2.55% 10/1/2029 -1.5%	3M Co.   4% 9/14/2048 Home Depot Inc.   3.125% 12/15/2049 JPMorgan Chase & Co.   4.625% PERP

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% 0.34% 6.80% Mining -0.13% 0.48% 1.74% 0.95% 0.69% 13.50% Construction -0.03% 0.55% 1.07% 0.80% 0.72% 10.83% Manufacturing -0.10% 0.38% 0.84% 0.78% 0.57% 12.03% Transportion, Communication, Electric/Gas -0.10% 0.61% 1.19% 0.73% 0.88% 15.35% Wholesale -0.12% 0.33% 1.06% 1.38% 0.52% 14.89% Retail -0.17% 0.36% 0.91% 0.55% 0.60% 13.72% Finance, Insurance, Real-Estate -0.05% 0.32% 0.71% 0.76% 0.46% 10.39% Services -0.09% 0.31% 0.73% 0.50% 0.48% 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% 0.72% 14.43%   Total returns (non-annualized) by rating, market weighted.

New Issues

New Issues [Continued]

1. New York Life Global Funding (USD) 2% 1/22/2025 144A (01/14/2020): 650MM Secured Notes, Price at Issuance 99.641, Yielding 2.08%. 2. Guardian Life Insurance (USD) 3.7% 1/22/2070 144A (01/14/2020): 300MM Subordinated Notes, Price at Issuance 98.852, Yielding 3.75%. 3. Owl Rock Capital Corp. (USD) 3.75% 7/22/2025 (01/14/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.62, Yielding 3.83%.

NEW ISSUANCE WATCH: on 01/15/2020 participants welcome a $1000MM new corporate-bond offering by
EQT Corp. 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)

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 29 bp (basis points), as of 01/15/2020
• Net positive capital flows into high-yield ETFs & mutual funds

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