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North American Bond Research – January 7, 2020

Posted on January 7, 2020
HIGH YIELD BOND RESEARCH
January 7, 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%.
DEMOCRATS ARE ASKING FOR EVIDENCE THAT AN IMMINENT ATTACK WAS GOING TO HAPPEN. A number of Democrats have been briefed and feel that the case for killing General Soleimani was thin at best.  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
+   Rite Aid Corp. 6.125% 4/1/2023 144A + 0.9%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.5%
  CCO Hldg LLC 4.75% 3/1/2030 144A + 0.1%
–   Icahn Enterprises LP 5.25% 5/15/2027 144A -0.5%
  Nabors Industries Inc. 5.75% 2/1/2025 -1.6%
  Icahn Enterprises LP 4.75% 9/15/2024 144A -0.5%
Rite Aid Corp.   6.125% 4/1/2023 144A
Nabors Industries Inc.   5.5% 1/15/2023
Pacific Gas & Electric Co.   6.05% 3/1/2034
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% 0.57% 1.84% 3.44% 0.47% 20.45%
Mining 0.29% 1.21% 6.26% 5.32% 1.18% 8.86%
Construction 0.08% 0.17% 0.87% 2.63% 0.14% 16.02%
Manufacturing 0.06% 0.27% 1.48% 3.70% 0.31% 13.28%
Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.31% 14.42%
Wholesale 0.12% 0.43% 1.82% 2.78% 0.44% 13.02%
Retail 0.09% 0.23% 1.81% 2.88% 0.23% 16.07%
Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.59% 0.27% 13.77%
Services 0.06% 0.22% 1.34% 2.92% 0.23% 13.25%
Public Administration -0.38% -0.17% 1.18% 2.41% -0.01% 14.91%
Energy 0.24% 1.12% 6.20% 4.69% 1.09% 9.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. MDC Holdings Inc. (USD) 3.85% 1/15/2030 (01/06/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.85%.

2. Wolverine Intermediate Holding Corp. (USD) 13.75% 4/15/2028 144A (01/07/2020): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 13.75%.

3. TEGNA Inc. (USD) 4.625% 3/15/2028 144A (01/07/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

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

4. DDM Holding AG: ¬100MM, 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)
Road King Infrastructure LTD (5Y Sen USD MR14)

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

 

HIGH YIELD BOND RESEARCH
January 7, 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 gained 1.6 basis points. S&P -0.28%, Dow  -0.42%, NASDAQ  -0.03%.
DEMOCRATS ARE ASKING FOR EVIDENCE THAT AN IMMINENT ATTACK WAS GOING TO HAPPEN. A number of Democrats have been briefed and feel that the case for killing General Soleimani was thin at best.  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
+   Rite Aid Corp. 6.125% 4/1/2023 144A + 0.9%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.5%
  CCO Hldg LLC 4.75% 3/1/2030 144A + 0.1%
–   Icahn Enterprises LP 5.25% 5/15/2027 144A -0.5%
  Nabors Industries Inc. 5.75% 2/1/2025 -1.6%
  Icahn Enterprises LP 4.75% 9/15/2024 144A -0.5%
Rite Aid Corp.   6.125% 4/1/2023 144A
Nabors Industries Inc.   5.5% 1/15/2023
Pacific Gas & Electric Co.   6.05% 3/1/2034
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% 0.57% 1.84% 3.44% 0.47% 20.45%
Mining 0.29% 1.21% 6.26% 5.32% 1.18% 8.86%
Construction 0.08% 0.17% 0.87% 2.63% 0.14% 16.02%
Manufacturing 0.06% 0.27% 1.48% 3.70% 0.31% 13.28%
Transportion, Communication, Electric/Gas 0.04% 0.25% 1.79% 2.11% 0.31% 14.42%
Wholesale 0.12% 0.43% 1.82% 2.78% 0.44% 13.02%
Retail 0.09% 0.23% 1.81% 2.88% 0.23% 16.07%
Finance, Insurance, Real-Estate 0.06% 0.24% 1.40% 2.59% 0.27% 13.77%
Services 0.06% 0.22% 1.34% 2.92% 0.23% 13.25%
Public Administration -0.38% -0.17% 1.18% 2.41% -0.01% 14.91%
Energy 0.24% 1.12% 6.20% 4.69% 1.09% 9.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. MDC Holdings Inc. (USD) 3.85% 1/15/2030 (01/06/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.85%.

2. Wolverine Intermediate Holding Corp. (USD) 13.75% 4/15/2028 144A (01/07/2020): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 13.75%.

3. TEGNA Inc. (USD) 4.625% 3/15/2028 144A (01/07/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

4. M/I Homes Inc. (USD) 4.95% 2/1/2028 144A (01/07/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.95%.

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

4. DDM Holding AG: ¬100MM, 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

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