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North American Bond Research – January 16, 2020

Posted on January 16, 2020
HIGH YIELD BOND RESEARCH
January 16, 2020
Bond Markets

EVEN THOUGH TRUMP’S IMPEACHMENT TRIAL STARTED TODAY, THE MARKETS DO NOT ANTICIPATE CONVICTION. With a second trade deal pasted, markets sense momentum and look forward to earnings season to continue the record-breaking momentum. 10 year Treasury notes were up 2.1 basis points. S&P +0.84%, Dow  +0.92%, NASDAQ  +1.06%.
THE SENATE PASSED USMCAA, 89-10, GIVING TRUMP A SECOND TRADE DEAL IN A WEEK. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.4% 4/1/2037 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Charter Communications Operating LLC 4.8% 3/1/2050 + 0.2%
  Alliance One Intl Inc. 9.875% 7/15/2021 + 6.1%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.6%
–   Western Digital Corp. 4.75% 2/15/2026 -0.0%
  Unit Corp. 6.625% 5/15/2021 -4.2%
  Bombardier Inc. 6% 10/15/2022 Reg S -2.3%
Charter Communications Operating LLC   4.8% 3/1/2050
Alliance One Intl Inc.   9.875% 7/15/2021
Pacific Gas & Electric Co.   6.05% 3/1/2034
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.02% 0.35% 1.42% 3.11% 0.80% 18.24%
Mining -0.07% -0.35% 2.68% 4.87% 0.62% 5.93%
Construction 0.02% 0.27% 0.79% 2.51% 0.47% 14.63%
Manufacturing 0.09% 0.48% 1.42% 4.04% 0.83% 12.68%
Transportion, Communication, Electric/Gas 0.04% 0.53% 1.57% 2.38% 0.73% 14.24%
Wholesale 0.07% 0.34% 2.04% 3.12% 0.88% 12.56%
Retail 0.09% 0.38% 1.94% 3.14% 0.78% 14.60%
Finance, Insurance, Real-Estate 0.05% 0.42% 1.21% 3.09% 0.68% 13.01%
Services 0.05% 0.37% 1.34% 3.08% 0.62% 11.96%
Public Administration 0.71% 0.52% 1.74% 3.16% 0.94% 13.97%
Energy -0.02% -0.14% 2.83% 4.73% 0.74% 7.17%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. EQT Corp. (USD) 7% 2/1/2030 (01/15/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7%.

2. Presidio Holding Company LLC (USD) 4.875% 2/1/2027 144A (01/15/2020): 400MM Secured Notes, Price at Issuance 100, Yielding 4.88%.

3. Ladder Capital Finance LLC (USD) 4.25% 2/1/2027 Reg S (01/16/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

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 01/16/2020 participants welcome a $750MM new corporate-bond offering by
Ladder Capital.  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)
SuperValu Inc. (5Y Sen USD MR14)

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 28 bp (basis points), as of 01/16/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 16, 2020
Bond Markets

EVEN THOUGH TRUMP’S IMPEACHMENT TRIAL STARTED TODAY, THE MARKETS DO NOT ANTICIPATE CONVICTION. With a second trade deal pasted, markets sense momentum and look forward to earnings season to continue the record-breaking momentum. 10 year Treasury notes were up 2.1 basis points. S&P +0.84%, Dow  +0.92%, NASDAQ  +1.06%.
THE SENATE PASSED USMCAA, 89-10, GIVING TRUMP A SECOND TRADE DEAL IN A WEEK.  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,  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
+   Citigroup Inc. 2.976% 11/5/2030 + 0.2%
  Union Pacific Corp. 4% 2/1/2021 + 0.2%
  Home Depot Inc. 3.125% 12/15/2049 + 0.0%
–   CVS Health Corp. 5.05% 3/25/2048 -0.0%
  Visa Inc. 2.2% 12/14/2020 -0.1%
  Dowdupont Inc. 5.419% 11/15/2048 -0.6%
Citigroup Inc.   2.976% 11/5/2030
Union Pacific Corp.   4% 2/1/2021
Home Depot Inc.   3.125% 12/15/2049
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.06% 0.34% 0.95% 2.28% 0.48% 5.86%
Mining 0.13% 0.53% 1.32% 2.42% 0.91% 13.25%
Construction 0.17% 0.37% 0.96% 1.99% 0.94% 10.63%
Manufacturing 0.13% 0.55% 0.73% 2.04% 0.76% 12.53%
Transportion, Communication, Electric/Gas 0.21% 0.70% 0.94% 2.28% 1.07% 15.78%
Wholesale 0.12% 0.58% 0.95% 2.55% 0.77% 14.57%
Retail 0.12% 0.52% 0.57% 1.78% 0.63% 13.81%
Finance, Insurance, Real-Estate 0.09% 0.36% 0.65% 1.72% 0.60% 10.67%
Services 0.14% 0.51% 0.66% 1.60% 0.65% 11.97%
Public Administration -0.01% 0.09% 0.18% 0.50% 0.25% 4.92%
Energy 0.16% 0.48% 1.16% 2.47% 0.76% 13.90%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Jackson National Life Global Funding (USD) 2.588% 1/17/2030 Reg S (01/15/2020): 150MM Secured Notes, Price at Issuance 100, Yielding 2.59%.

2. MET Tower Global Funding (USD) FLT% 1/17/2023 Reg S (01/15/2020): 500MM Secured Notes, Price at Issuance 100.

3. MET Tower Global Funding (USD) FLT% 1/17/2023 144A (01/15/2020): 500MM Secured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 01/16/2020 participants welcome a $750MM new corporate-bond offering by
Rockies Express Pipeline. 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 28 bp (basis points), as of 01/16/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

 

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