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North American Bond Research – January 22, 2020

Posted on January 22, 2020
HIGH YIELD BOND RESEARCH
January 22, 2020
Bond Markets

STOCKS POPPED IN EARLY SESSION AND HAVE SINCE COME LOWER. COUNTLESS ANALYSTS, HEDGE FUND MANAGERS, AND MARKET COMMENTATORS ARE PERPLEXED BY THE MARKETS IN THE US CONSTANTLY GOING UP. 10 year Treasury notes were unchanged. S&P +0.09%, Dow  +0.06%, NASDAQ  +0.18%.
PAUL TUDOR JONES HAS STATED THAT THE MARKETS ARE LIKE 1999. HE BELIEVES A SERIOUS CORRECTION MAY BE LINING UP. 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
+   Intelsat Luxembourg SA 8.125% 6/1/2023 + 0.4%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 + 1.5%
  General Motors Co. 6.25% 10/2/2043 + 0.3%
–   Steel Dynamics 5% 12/15/2026 -0.1%
  Frontier Communications Corp. 7.625% 4/15/2024 -1.4%
  Cimpor Financial Operations 5.75% 7/17/2024 Reg S -2.1%
Intelsat Luxembourg SA   8.125% 6/1/2023
Teva Pharmaceutical Industries LTD   3.15% 10/1/2026
General Motors Co.   6.25% 10/2/2043
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 0.26% 1.14% 3.18% 1.04% 18.02%
Mining -0.29% -0.44% 0.77% 5.08% 0.48% 5.45%
Construction -0.00% 0.17% 0.84% 2.36% 0.70% 14.37%
Manufacturing -0.04% 0.20% 1.22% 3.77% 1.09% 11.99%
Transportion, Communication, Electric/Gas -0.03% 0.19% 1.14% 2.38% 0.89% 13.16%
Wholesale -0.02% 0.13% 2.00% 3.30% 1.67% 11.52%
Retail -0.07% 0.24% 1.14% 2.94% 0.89% 14.17%
Finance, Insurance, Real-Estate -0.01% 0.11% 0.99% 2.87% 0.84% 11.89%
Services -0.06% 0.22% 1.04% 3.15% 0.91% 11.68%
Public Administration -0.47% 0.32% 1.24% 3.70% 0.55% 13.17%
Energy -0.14% -0.15% 1.26% 5.08% 0.82% 7.17%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/22/2020)
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 01/16/2020 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)
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 25 bp (basis points), as of 01/21/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 22, 2020
Bond Markets

STOCKS ARE LOWER DUE IN PART BECAUSE OF THE SENATE TRIAL OF DONALD TRUMP, THE CORONAVIRUS BEING DETECTED IN THE UNITED STATES AND THE APPREHENSION OF WHEN THE 10 YEAR EXPANSION MAY END. 10 year Treasury notes were down 6.7 basis points. S&P -0.33%, Dow  -0.62%, NASDAQ  -0.26%
PAUL TUDOR JONES HAS STATED THAT THE MARKETS ARE LIKE 1999. HE BELIEVES A SERIOUS CORRECTION MAY BE LINING UP. 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
+   Wells Fargo Bank NA 2.6% 1/15/2021 + 0.1%
  GE Capital Corp. 5.875% 1/14/2038 + 0.2%
  Home Depot Inc. 3.125% 12/15/2049 + 2.0%
–   Occidental Petroleum Corp. 4.4% 8/15/2049 -0.9%
  Energy Transfer Operating, LP 3.75% 5/15/2030 -0.4%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 -0.3%
Occidental Petroleum Corp.   4.4% 8/15/2049
Energy Transfer Operating, LP   3.75% 5/15/2030
Wells Fargo Bank NA   2.6% 1/15/2021
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.04% 0.05% 0.90% 2.55% 0.63% 5.59%
Mining 0.13% 0.22% 1.26% 2.68% 1.04% 13.06%
Construction 0.11% 0.34% 1.17% 2.31% 1.18% 11.44%
Manufacturing 0.14% 0.31% 1.09% 2.14% 0.93% 12.25%
Transportion, Communication, Electric/Gas 0.20% 0.46% 1.46% 2.71% 1.37% 15.94%
Wholesale 0.14% 0.31% 1.17% 2.53% 0.99% 14.40%
Retail 0.20% 0.35% 1.00% 1.95% 0.88% 14.40%
Finance, Insurance, Real-Estate 0.07% 0.20% 0.88% 1.76% 0.71% 10.50%
Services 0.13% 0.28% 0.99% 1.71% 0.83% 11.73%
Public Administration 0.05% 0.07% 0.44% 0.58% 0.32% 5.18%
Energy 0.15% 0.27% 1.13% 2.74% 0.91% 13.50%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Target Corp. (USD) 2.35% 2/15/2030 (01/21/2020): 750MM Senior Unsecured Notes.

2. SBA Communications Corp. (USD) 3.875% 2/15/2027 Reg S (01/21/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100.

3. State Street Corp. (USD) 2.4% 1/24/2030 (01/21/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.594.

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 25 bp (basis points), as of 01/21/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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