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North American Bond Research – January 31, 2020

Posted on January 31, 2020
HIGH YIELD BOND RESEARCH
January 31, 2020
Bond Markets

THE SPREADING CORONA VIRUS AND TRAVEL BAN PUMMELED MARKETS! OIL FELL, VIX POPPED UP, AND TREASURIES SLUMPED.  10 year Treasury notes were down 4.7 basis points. S&P 10 year Treasury notes were down 3.8 basis points. S&P -1.77%, Dow -2.09%, NASDAQ -1.59%.
CHINA TO DATE HAS HAD 8200+ CASES AND 170+ DEATHS. INFECTION HAS SPREAD TO OVER 17 COUNTRIES WITH 110+ CONFIRMED CASES.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.125% 11/15/2023 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Navistar Intl Corp. 6.625% 11/1/2025 144A + 3.7%
  Intelsat Luxembourg SA 8.125% 6/1/2023 + 11.5%
  Adient Global Hldg LTD 4.875% 8/15/2026 + 4.7%
–   APX Group Inc. 7.625% 9/1/2023 -0.9%
  WPX Energy Inc. 4.5% 1/15/2030 -0.7%
  Transocean Inc. 8% 2/1/2027 144A -0.8%
Sprint Corp.   7.25% 2/1/2028 144A
PTC Inc.   3.625% 2/15/2025 144A
Navistar Intl Corp.   6.625% 11/1/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.19% -0.19% 1.02% 3.05% 1.02% 17.99%
Mining -0.33% -1.35% -2.11% 2.42% -2.09% 2.57%
Construction 0.04% 0.10% 0.92% 2.17% 0.94% 13.23%
Manufacturing -0.04% -0.22% 0.79% 3.40% 0.83% 12.14%
Transportion, Communication, Electric/Gas -0.08% -0.37% 0.54% 2.60% 0.61% 13.00%
Wholesale -0.06% -0.24% 1.47% 2.53% 1.42% 10.04%
Retail -0.05% -0.18% 0.57% 2.73% 0.58% 13.85%
Finance, Insurance, Real-Estate 0.00% -0.11% 0.89% 2.50% 0.90% 12.53%
Services -0.04% -0.32% 0.55% 2.53% 0.55% 11.14%
Public Administration -0.08% 0.22% 0.93% 2.77% 1.01% 13.73%
Energy -0.26% -1.10% -1.33% 3.01% -1.34% 4.24%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Sprint Corp. (USD) 7.25% 2/1/2028 144A (01/30/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99, Yielding 7.42%.

2. Morgan Stanley (CAD) FLT% 2/3/2023 (01/30/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100.

3. PTC Inc. (USD) 4% 2/15/2028 Reg S (01/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

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 01/30/2020 participants welcome a $1000MM new corporate-bond offering by
Sprint Corp.  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 21 bp (basis points), as of 01/31/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
January 31, 2020
Bond Markets

THE SPREADING CORONA VIRUS AND TRAVEL BAN PUMMELED MARKETS! OIL FELL, VIX POPPED UP, AND TREASURIES SLUMPED.  10 year Treasury notes were down 4.7 basis points. S&P 10 year Treasury notes were down 3.8 basis points. S&P -1.77%, Dow -2.09%, NASDAQ -1.59%.
CHINA TO DATE HAS HAD 9700+ CASES AND 230+ DEATHS. INFECTION HAS SPREAD TO OVER 20 COUNTRIES WITH 140+ CONFIRMED CASES.  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,  Anheuser Busch Companies Inc (USD) 5.75% 4/1/2036  made analysts’ ‘Conviction Buy’ list. (See the chart below for Anheuser Busch Companies Inc bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Energy Transfer Operating, LP 5% 5/15/2050 + 0.6%
  Union Pacific Corp. 3.25% 2/5/2050 + 1.0%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 + 0.5%
–   Enterprise Products Operating LLC 3.7% 1/31/2051 -0.1%
  Intel Corp. 3.25% 11/15/2049 -0.5%
  Bank of America Corp. 4.3% PERP -0.6%
Energy Transfer Operating, LP   5% 5/15/2050
Union Pacific Corp.   3.25% 2/5/2050
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 1.14% 2.26% 3.72% 2.25% 6.01%
Mining 0.06% 0.44% 1.62% 2.93% 1.65% 12.15%
Construction 0.09% 0.65% 2.05% 2.98% 2.11% 11.97%
Manufacturing 0.08% 0.61% 1.81% 2.87% 1.86% 12.25%
Transportion, Communication, Electric/Gas 0.04% 0.75% 2.48% 3.71% 2.56% 16.36%
Wholesale 0.06% 0.56% 1.86% 3.27% 1.89% 14.87%
Retail 0.07% 0.65% 1.84% 2.85% 1.90% 13.94%
Finance, Insurance, Real-Estate 0.07% 0.54% 1.53% 2.44% 1.54% 10.84%
Services 0.07% 0.61% 1.72% 2.50% 1.76% 11.75%
Public Administration 0.06% 0.39% 0.76% 1.03% 0.79% 5.22%
Energy 0.06% 0.48% 1.52% 3.04% 1.55% 12.76%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. PACCAR Financial Corp. (USD) 1.8% 2/6/2025 (01/30/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.919, Yielding 1.82%.

2. Kimberly-Clark Corp. (USD) 2.875% 2/7/2050 (01/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.68, Yielding 2.89%.

3. Credit Suisse New York (USD) FLT% 2/4/2022 (01/30/2020): 2000MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 01/30/2020 participants welcome a $300MM new corporate-bond offering by
PACCAR Corp. 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 21 bp (basis points), as of 01/31/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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