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North American Bond Research – January 3, 2020

Posted on January 3, 2020
HIGH YIELD BOND RESEARCH
January 3, 2020

Bond Markets


KILLING IRAN’S TOP GENERAL HAS PUT THE ENTIRE EQUITY MARKET IN A TOUGH POSITION. No one knows where this will go. Markets are in suspense as to where this will end? 10-year note lost 3.7 basis points. S&P -0.71%, Dow  -0.81%, NASDAQ  -0.71%.
CRUDE OIL PRICE UP AS MARKET GRAPPLES WITH WHAT WILL HAPPEN NEXT DUE TO IRANIAN GENERAL BEING KILLED.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Level 3 Financing Inc. (USD) 5.375% 8/15/2022 made analysts’ ‘Conviction Buy’ list. (See the chart below for Level 3 Financing Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Firstenergy Corp. 7.375% 11/15/2031 + 0.4%
  Ally Financial Inc. 4.125% 3/30/2020 + 0.2%
  Credit Agricole SA 8.125% PERP 144A + 0.0%
–   Bausch Health Cos Inc. 5% 1/30/2028 144A -0.2%
  US Steel Corp. 6.875% 8/15/2025 -0.6%
  Forum Energy Technologies Inc. 6.25% 10/1/2021 (1) -6.0%
Bausch Health Cos Inc.   5% 1/30/2028 144A
Pacific Gas & Electric Co.   6.05% 3/1/2034
US Steel Corp.   6.875% 8/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.16% 0.24% 2.12% 3.42% 0.16% 20.01%
Mining 0.15% 0.42% 5.82% 4.44% 0.15% 9.58%
Construction 0.05% 0.15% 1.03% 2.58% 0.05% 16.61%
Manufacturing 0.12% 0.22% 1.59% 3.58% 0.12% 14.24%
Transportion, Communication, Electric/Gas 0.13% 0.18% 1.77% 2.15% 0.13% 14.72%
Wholesale 0.11% 0.33% 2.29% 2.35% 0.11% 14.17%
Retail 0.11% 0.30% 1.81% 2.78% 0.11% 16.84%
Finance, Insurance, Real-Estate 0.11% 0.24% 1.49% 2.56% 0.11% 14.60%
Services 0.11% 0.21% 1.56% 2.81% 0.11% 13.92%
Public Administration -0.18% 0.03% 0.97% 2.30% -0.18% 15.67%
Energy 0.15% 0.44% 5.69% 3.97% 0.15% 9.67%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 01/03/2020)
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 11/14/19 participants welcome a $1175MM new corporate-bond offering by
Wolverine Ecrow The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 Million.
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 38 bp (basis points), as of 01/03/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 3, 2020

Bond Markets


KILLING IRAN’S TOP GENERAL HAS PUT THE ENTIRE EQUITY MARKET IN A TOUGH POSITION. No one knows where this will go. Markets are in suspense as to where this will end? 10-year note lost 3.7 basis points. S&P -0.71%, Dow  -0.81%, NASDAQ  -0.71%.
CRUDE OIL PRICE UP AS MARKET GRAPPLES WITH WHAT WILL HAPPEN NEXT DUE TO IRANIAN GENERAL BEING KILLED. 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,  CVS Caremark Corp. (USD) 5.75% 5/15/2041  made analysts’ ‘Conviction Buy’ list. (See the chart below for CVS Caremark Corp. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Wells Fargo & Co. 2.625% 7/22/2022 + 0.2%
  CVS Health Corp. 5.05% 3/25/2048 + 0.6%
  Anheuser-Busch Inbev Worldwide Inc. 4.6% 4/15/2048 + 0.4%
–   Citigroup Inc. 2.75% 4/25/2022 -0.1%
  Apache Corp. 4.75% 4/15/2043 -0.2%
  Toronto-Dominion Bank 2.5% 12/14/2020 -0.0%
Wells Fargo & Co.   2.625% 7/22/2022
CVS Health Corp.   5.05% 3/25/2048
Anheuser-Busch Inbev Worldwide Inc.   4.6% 4/15/2048
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.01% 0.38% 1.38% 1.28% -0.01% 6.81%
Mining 0.17% 0.24% 1.43% 0.97% 0.17% 12.93%
Construction 0.17% 0.12% 0.76% 0.84% 0.17% 11.49%
Manufacturing 0.16% 0.20% 0.68% 0.95% 0.16% 11.57%
Transportion, Communication, Electric/Gas 0.25% 0.17% 0.84% 0.81% 0.25% 14.44%
Wholesale 0.19% 0.28% 0.94% 1.59% 0.19% 14.55%
Retail 0.17% 0.19% 0.76% 0.72% 0.17% 13.35%
Finance, Insurance, Real-Estate 0.12% 0.23% 0.55% 0.86% 0.12% 10.06%
Services 0.14% 0.18% 0.62% 0.69% 0.14% 11.46%
Public Administration 0.06% 0.14% 0.22% -0.10% 0.06% 4.89%
Energy 0.18% 0.26% 1.58% 1.11% 0.18% 13.51%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 01/03/2020)

Additional Commentary


NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1000MM new corporate-bond offering by
Nationwide Financial Service. The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 Million.
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 38 bp (basis points), as of 01/03/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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