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North American Bond Research – January 23, 2020

Posted on January 23, 2020
HIGH YIELD BOND RESEARCH
January 23, 2020
Bond Markets

WORLDS STOCK MARKETS WERE DOWN FOR MOST OF THE DAY. SOVEREIGN BONDS WERE MIXED TO DOWN. OIL WAS NOTICIBLY LOWER.  10 year Treasury notes were down 2.9 basis points. S&P +0.11%, Dow  -0.09%, NASDAQ +0.20%
GOLD WAS UP.  SILVER WAS DOWN. VIX POPPED UP TO A 10 DAY HIGH. MORE HEDGEFUND MANAGERS AND MARKET EXPERTS ARE INCREDULOUS AT STOCKS UPWARD PUSH AND NO FUNDAMENTALS.    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
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.7%
  Univision Communications Inc. 5.125% 2/15/2025 144A + 0.2%
  Charter Communications Operating LLC 4.8% 3/1/2050 + 0.3%
–   Communications Sales & Leasing Inc. 8.25% 10/15/2023 -1.4%
  CNH Industrial Capital LLC 3.875% 10/15/2021 -0.0%
  Bombardier Inc. 7.875% 4/15/2027 144A -1.9%
Albertsons Cos Safeway   3.5% 2/15/2023 144A (1)
Vici Properties LLC   3.75% 2/15/2027 144A
Albertsons Companies Inc.   4.625% 1/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.02% 0.20% 1.11% 2.97% 1.02% 17.86%
Mining -0.24% -0.65% 0.45% 4.97% 0.06% 5.98%
Construction 0.02% 0.22% 0.90% 2.35% 0.78% 14.73%
Manufacturing 0.01% 0.15% 1.33% 3.81% 1.19% 12.06%
Transportion, Communication, Electric/Gas 0.01% 0.18% 1.16% 2.39% 0.92% 13.49%
Wholesale -0.07% 0.28% 1.96% 3.22% 1.66% 11.53%
Retail -0.07% 0.06% 1.28% 2.92% 0.99% 14.28%
Finance, Insurance, Real-Estate 0.03% 0.15% 1.13% 2.82% 0.99% 12.29%
Services -0.10% 0.13% 0.98% 2.97% 0.87% 11.63%
Public Administration 0.90% 0.52% 2.14% 3.00% 1.46% 14.06%
Energy -0.18% -0.44% 0.77% 4.89% 0.38% 7.14%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Baytex Energy Corp. (USD) 8.75% 4/1/2027 144A (01/22/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8.75%.

2. Vici Properties LLC (USD) 3.75% 2/15/2027 Reg S (01/22/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

3. Vici Properties LLC (USD) 3.5% 2/15/2025 Reg S (01/22/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.5%.

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 26 bp (basis points), as of 01/23/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 23, 2020
Bond Markets

WORLDS STOCK MARKETS WERE DOWN FOR MOST OF THE DAY. SOVEREIGN BONDS WERE MIXED TO DOWN. OIL WAS NOTICIBLY LOWER.  10 year Treasury notes were down 2.9 basis points. S&P +0.11%, Dow  -0.09%, NASDAQ +0.20%
GOLD WAS UP.  SILVER WAS DOWN. VIX POPPED UP TO A 10 DAY HIGH. MORE HEDGEFUND MANAGERS AND MARKET EXPERTS ARE INCREDULOUS AT STOCKS UPWARD PUSH AND NO FUNDAMENTALS.   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
+   Energy Transfer Operating, LP 5% 5/15/2050 + 0.1%
  Morgan Stanley VAR% 10/24/2023 + 0.1%
  HCA Inc. 5.25% 6/15/2049 + 0.2%
–   Boeing Co. 2.95% 2/1/2030 -0.6%
  Occidental Petroleum Corp. 3.5% 8/15/2029 -0.6%
  Caterpillar Financial Services Corp. 2.15% 11/8/2024 -0.8%
Albertsons Cos Safeway   3.5% 2/15/2023 144A
Energy Transfer Operating, LP   5% 5/15/2050
Abbvie Inc.   3.2% 11/21/2029 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 0.23% 0.96% 2.31% 0.71% 5.86%
Mining 0.19% 0.32% 1.45% 2.56% 1.24% 12.75%
Construction 0.13% 0.28% 1.31% 2.31% 1.31% 11.57%
Manufacturing 0.19% 0.43% 1.38% 2.31% 1.23% 12.78%
Transportion, Communication, Electric/Gas 0.25% 0.54% 1.75% 2.77% 1.67% 16.02%
Wholesale 0.21% 0.45% 1.47% 2.80% 1.32% 14.97%
Retail 0.17% 0.44% 1.17% 1.93% 1.07% 13.71%
Finance, Insurance, Real-Estate 0.13% 0.27% 1.05% 1.83% 0.89% 10.72%
Services 0.14% 0.34% 1.20% 1.71% 1.05% 11.71%
Public Administration 0.06% 0.13% 0.51% 0.58% 0.40% 5.13%
Energy 0.15% 0.33% 1.28% 2.66% 1.08% 13.46%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Albertsons Cos Safeway (USD) 3.5% 2/15/2023 144A (01/22/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.5%.

2. Adobe Inc. (USD) 1.7% 2/1/2023 (01/22/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.863, Yielding 1.75%.

3. Toronto-Dominion Bank (USD) FLT% 1/27/2023 (01/22/2020): 1000MM Senior Unsecured 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 26 bp (basis points), as of 01/23/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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