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North American Bond Research – January 27, 2020

Posted on January 27, 2020
HIGH YIELD BOND RESEARCH
January 27, 2020
Bond Markets

THE SPREAD OF THE CORONAVIRUS FROM CHINA HAS CAUSED MARKETS WORLDWIDE TO FALTER. STOCKS WORLDWIDE HAVE FALLEN ANYWHERE FROM 1.5 TO 3%. CONTAINMENT IS STILL THE ISSUE. 10 year Treasury notes were down 7.6 basis points. S&P -1.57%, Dow -1.57%, NASDAQ -1.89%.
CHINA TO DATE HAS HAD 2700+ CASES AND 80+ DEATHS. INFECTION HAS SPREAD TO OVER 15 COUNTRIES. 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
+   Bahia SUL Hldgs Gmbh 5.75% 7/14/2026 + 0.0%
  Communications Sales & Leasing Inc. 8.25% 10/15/2023 + 1.2%
  Charter Communications Operating LLC 4.8% 3/1/2050 + 0.2%
–   Petrobras Global Finance BV 6.85% 6/5/2115 -0.6%
  HCA Inc. 5.25% 4/15/2025 -0.2%
  Chemours Co. LLC 7% 5/15/2025 -1.7%
Petrobras Global Finance BV   6.85% 6/5/2115
HCA Inc.   5.25% 4/15/2025
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 -0.00% 0.23% 1.18% 2.90% 1.05% 17.85%
Mining -0.64% -1.26% -0.07% 4.24% -0.45% 4.68%
Construction -0.02% 0.27% 0.94% 2.34% 0.83% 14.75%
Manufacturing -0.14% 0.04% 1.19% 3.58% 1.06% 12.31%
Transportion, Communication, Electric/Gas -0.07% 0.16% 1.01% 2.39% 0.94% 13.34%
Wholesale -0.09% 0.17% 1.97% 3.17% 1.67% 11.55%
Retail -0.13% -0.05% 1.19% 2.94% 0.94% 14.48%
Finance, Insurance, Real-Estate -0.08% 0.18% 1.15% 2.80% 1.01% 12.47%
Services -0.14% -0.01% 0.85% 2.83% 0.74% 11.74%
Public Administration -0.47% 0.42% 1.74% 2.51% 1.00% 13.14%
Energy -0.50% -0.89% 0.32% 4.35% -0.06% 6.30%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/27/2020)
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 27 bp (basis points), as of 01/27/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 27, 2020
Bond Markets

THE SPREAD OF THE CORONAVIRUS FROM CHINA HAS CAUSED MARKETS WORLDWIDE TO FALTER. STOCKS WORLDWIDE HAVE FALLEN ANYWHERE FROM 1.5 TO 3%. CONTAINMENT IS STILL THE ISSUE. 10 year Treasury notes were down 7.6 basis points. S&P -1.57%, Dow -1.57%, NASDAQ -1.89%.
CHINA TO DATE HAS HAD 2700+ CASES AND 80+ DEATHS. INFECTION HAS SPREAD TO OVER 15 COUNTRIES.  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
+   CVS Health Corp. 5.05% 3/25/2048 + 0.3%
  Bank of America Corp. VAR% 10/22/2030 + 0.3%
  Anheuser-Busch Inbev Worldwide Inc. 5.55% 1/23/2049 + 0.2%
–   Occidental Petroleum Corp. 3.5% 8/15/2029 -0.6%
  Energy Transfer Operating, LP 5% 5/15/2050 -0.9%
  Synchrony Financial 5.15% 3/19/2029 -0.0%
CVS Health Corp.   5.05% 3/25/2048
Bank of America Corp.   VAR% 10/22/2030
Occidental Petroleum Corp.   3.5% 8/15/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.05% 0.34% 1.15% 2.33% 0.88% 5.63%
Mining 0.02% 0.41% 1.53% 2.53% 1.29% 12.67%
Construction 0.10% 0.44% 1.62% 2.47% 1.53% 11.60%
Manufacturing 0.08% 0.56% 1.54% 2.37% 1.35% 12.53%
Transportion, Communication, Electric/Gas 0.14% 0.74% 2.03% 2.86% 1.93% 16.07%
Wholesale 0.06% 0.55% 1.50% 2.65% 1.35% 14.21%
Retail 0.14% 0.68% 1.46% 2.06% 1.30% 14.06%
Finance, Insurance, Real-Estate 0.08% 0.41% 1.24% 1.93% 1.05% 10.86%
Services 0.10% 0.52% 1.41% 1.85% 1.22% 11.79%
Public Administration 0.05% 0.19% 0.62% 0.56% 0.45% 5.16%
Energy 0.01% 0.43% 1.37% 2.60% 1.14% 13.28%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Bank of Nova Scotia (USD) 2.5% 1/29/2027 (01/27/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.5%.
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 27 bp (basis points), as of 01/27/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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