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North American Bond Research – January 28, 2020

Posted on January 28, 2020
HIGH YIELD BOND RESEARCH
January 28, 2020
Bond Markets

STOCKS BOUNCED BACK FROM A TOUGH DAY YESTERDAY. SOME STOCK OPTIMISTS FEEL THE PULL BACK WAS DUE TO HAPPEN AND THE MARKET WAS LOOKING FOR ANY EXCUSE. FUNDAMENTALIST STILL FEEL A PULL BACK MAY EXPOSE A VERY OVERLY EUPHORIC ATTITUDE. 10 year Treasury notes were down 7.6 basis points. S&P +1.27%, Dow +0.86%, NASDAQ +1.59%
CHINA TO DATE HAS HAD 4500+ CASES AND 100+ DEATHS. INFECTION HAS SPREAD TO OVER 17 COUNTRIES WITH 70+ CONFIRMED CASES. HONG KONG HAS CLOSED SUBSTANTIALLY ITS BORDERS WITH CHINA. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Chesapeake Energy Corp (USD) 6.875% 11/15/2020 made analysts’ ‘Conviction Buy’ list. (See the chart below for Chesapeake Energy Corp bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.7%
  Rowan Cos Inc. 4.875% 6/1/2022 + 4.5%
  Petrobras Global Finance BV 6.85% 6/5/2115 + 0.3%
–   Ally Financial Inc. 4.625% 5/19/2022 -0.1%
  HCA Inc. 4.75% 5/1/2023 -0.1%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -5.2%
Pacific Gas & Electric Co.   6.05% 3/1/2034
Rowan Cos Inc.   4.875% 6/1/2022
Ally Financial Inc.   4.625% 5/19/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% -0.12% 1.18% 2.75% 1.08% 17.66%
Mining -0.70% -2.22% -1.53% 2.55% -1.58% 4.87%
Construction -0.18% -0.02% 0.85% 2.14% 0.84% 14.30%
Manufacturing -0.33% -0.44% 0.77% 3.32% 0.76% 11.73%
Transportion, Communication, Electric/Gas -0.29% -0.21% 0.59% 1.95% 0.68% 13.13%
Wholesale -0.26% -0.27% 1.08% 2.49% 0.90% 11.11%
Retail -0.40% -0.57% 0.45% 2.47% 0.47% 13.88%
Finance, Insurance, Real-Estate -0.25% -0.16% 0.80% 2.52% 0.77% 12.23%
Services -0.37% -0.55% 0.50% 2.49% 0.47% 11.30%
Public Administration 0.31% 0.32% 1.12% 2.90% 1.15% 13.71%
Energy -0.61% -1.79% -0.87% 3.00% -0.96% 6.08%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/28/2020)
1. EMPTY PLACEHOLDER: EMPTY
Additional Commentary

NEW ISSUANCE WATCH: on 01/28/2020 participants welcome a $750MM new corporate-bond offering by
Station Casino.  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 24 bp (basis points), as of 01/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

HIGH YIELD BOND RESEARCH
January 28, 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
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.7%
  Rowan Cos Inc. 4.875% 6/1/2022 + 4.5%
  Antero Resources Corp. 5.625% 6/1/2023 + 7.0%
–   Ally Financial Inc. 4.625% 5/19/2022 -0.1%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -7.0%
  HCA Inc. 4.75% 5/1/2023 -0.1%
Pacific Gas & Electric Co.   6.05% 3/1/2034
Rowan Cos Inc.   4.875% 6/1/2022
Ally Financial Inc.   4.625% 5/19/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% -0.12% 1.18% 2.75% 1.08% 17.66%
Mining -0.70% -2.22% -1.53% 2.55% -1.58% 4.87%
Construction -0.18% -0.02% 0.85% 2.14% 0.84% 14.30%
Manufacturing -0.33% -0.44% 0.77% 3.32% 0.76% 11.73%
Transportion, Communication, Electric/Gas -0.29% -0.21% 0.59% 1.95% 0.68% 13.13%
Wholesale -0.26% -0.27% 1.08% 2.49% 0.90% 11.11%
Retail -0.40% -0.57% 0.45% 2.47% 0.47% 13.88%
Finance, Insurance, Real-Estate -0.25% -0.16% 0.80% 2.52% 0.77% 12.23%
Services -0.37% -0.55% 0.50% 2.49% 0.47% 11.30%
Public Administration 0.31% 0.32% 1.12% 2.90% 1.15% 13.71%
Energy -0.61% -1.79% -0.87% 3.00% -0.96% 6.08%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/28/2020)
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 26 bp (basis points), as of 01/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

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