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North American Bond Research – July 31, 2020

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

MARKETS WERE DOWN IN EUROPE BUT UP IN THE US AS TALKS OF MORE STIMULUS PUSHED MARKETS HIGHER. THERE SEEMS TO BE A GROWING DIVIDE BETWEEN TECH STOCKS SOARING AND THE REST OF THE MARKET STRUGGLING. 10 Year Treasury notes were down .5 bps. S&P +0.77%, Dow +0.44%, NASDAQ +1.49%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 17.7 MILLION+ CASES AND 681000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.7 MILLION+ CASES AND 157000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028 made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.6%
  Pacific Gas & Electric Co. 3.45% 7/1/2025 +0.2%
  Pacific Gas & Electric Co. 3.3% 12/1/2027 +0.0%
  Pacific Gas & Electric Co. 2.95% 3/1/2026 +0.0%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.1%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.0%
  Pacific Gas & Electric Co. 3.75% 7/1/2028 -0.0%
  Pacific Gas & Electric Co. 4.3% 3/15/2045 -0.3%
  Pacific Gas & Electric Co. 4.75% 2/15/2044 -0.1%
  Pacific Gas & Electric Co. 3.95% 12/1/2047 -1.0%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   3.75% 7/1/2028
Pacific Gas & Electric Co.   4.3% 3/15/2045
Pacific Gas & Electric Co.   3.45% 7/1/2025
Pacific Gas & Electric Co.   3.3% 12/1/2027
Pacific Gas & Electric Co.   4.75% 2/15/2044
Pacific Gas & Electric Co.   2.95% 3/1/2026
Pacific Gas & Electric Co.   3.95% 12/1/2047
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.06% 0.30% 3.30% 6.26% 4.54% 8.42%
Mining 0.13% 0.43% 5.16% 27.75% -13.58% -8.51%
Construction 0.17% 0.85% 3.46% 10.53% 2.89% 7.44%
Manufacturing 0.05% 0.50% 4.07% 10.56% 1.36% 6.62%
Transportion, Communication, Electric/Gas 0.06% 0.25% 3.09% 8.09% 3.34% 6.86%
Wholesale 0.05% 0.60% 2.74% 12.60% 0.94% 4.59%
Retail 0.09% 0.69% 4.70% 11.12% -0.09% 3.77%
Finance, Insurance, Real-Estate 0.02% 0.37% 3.03% 9.29% 0.50% 4.67%
Services 0.07% 0.39% 3.83% 9.02% 1.17% 6.07%
Public Administration 0.22% 0.52% 2.66% 10.02% 3.64% 7.96%
Energy 0.16% 0.64% 5.62% 26.95% -10.60% -6.35%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. NFP Corp. (USD) 6.875% 8/15/2028 144A (07/30/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.88%.

2. NFP Corp. (USD) 6.875% 8/15/2028 Reg S (07/30/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.88%.

3. G-III Apparel Group LTD (USD) 7.875% 8/15/2025 144A (07/30/2020): 400MM First Lien Notes, Price at Issuance 100, Yielding 7.88%.

4. G-III Apparel Group LTD (USD) 7.875% 8/15/2025 Reg S (07/30/2020): 400MM First Lien Notes, Price at Issuance 100, Yielding 7.88%.

5. United Rentals North AM (USD) 3.875% 2/15/2031 (07/31/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

1. Aldevron LLC: $50MM TL (B1/B)

2. Concord : $850MM credit facilities (B1/BB-): $450MM revolver; $400MM TLB

3. CJ Foods Inc.: $285MM TLB

4. Thyssenkrupp Elevator: $2.875B seven-year first-lien term loan B (B1/B/B+); ¬1.1015B seven-year first-lien first-lien term loan B (B1/B/B+)

5. Logmein Inc.: $3.55B credit facilities: $250MM Revolver; $2.7B first lien TL; $600MM second-lien TL

6. RSA: $1.425B credit facilities: $75MM revolver; $1B TL; $350MM TL

7. Huntsworth PLC: $300MM TL

8. Sequa Corp.: $200MM TL

9. RSA: $1.425B credit facilities: $75MM revolver; $1B TL; $350MM TL

10. Logmein Inc.: $3.55B credit facilities: $250MM Revolver; $2.7B first lien TL; $600MM second-lien TL

Additional Commentary

NEW ISSUANCE WATCH: NFP Corp.issued $1250MM in notes.
Top Widening Loans Top Narrowing Loans
Petco Animal Supplies Inc. (USD) TLB1 L+325 01/26/2023
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
Duravant LLC (USD) TL2 L+725 07/25/2025
Tacala LLC (USD) TLB L+350 02/05/2027
Verifone Inc. (USD) TL L+400 08/20/2025
Colfax Corp. (USD) TLA1 L+150 12/06/2024
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Tecomet Inc. (USD) TL L+350 05/01/2024
Albertsons LLC (USD) TL L+275 11/17/2025
Ball Corp. (USD) TLA L+150 03/21/2024

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 16 bp (basis points), as of 07/31/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
July 31, 2020
Bond Markets

MARKETS WERE DOWN IN EUROPE BUT UP IN THE US AS TALKS OF MORE STIMULUS PUSHED MARKETS HIGHER. THERE SEEMS TO BE A GROWING DIVIDE BETWEEN TECH STOCKS SOARING AND THE REST OF THE MARKET STRUGGLING. 10 Year Treasury notes were down .5 bps. S&P +0.77%, Dow +0.44%, NASDAQ +1.49%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 17.7 MILLION+ CASES AND 681000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.7 MILLION+ CASES AND 157000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Halliburton Co. (USD) 5% 11/15/2045 made analysts’ ‘Conviction Buy’ list. (See the chart below for Halliburton Co.  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 3.15% 1/1/2026 +0.1%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.6%
  Bank of America Corp. 1.898% 7/23/2031 +0.5%
  Nomura Hldg Inc. 1.851% 4/16/2025 +0.1%
  Southwest Airlines Co. 5.125% 6/15/2027 +0.2%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.0%
  AT&T Inc. 2.25% 2/1/2032 -0.2%
  Pacific Gas & Electric Co. 3.75% 7/1/2028 -0.0%
  Citibank NA 3.4% 7/23/2021 -0.0%
  Royal Bank of Canada 2.75% 2/1/2022 -0.1%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   3.15% 1/1/2026
Pacific Gas & Electric Co.   4.95% 7/1/2050
Bank of America Corp.   1.898% 7/23/2031
AT&T Inc.   2.25% 2/1/2032
Nomura Hldg Inc.   1.851% 4/16/2025
Pacific Gas & Electric Co.   3.75% 7/1/2028
Southwest Airlines Co.   5.125% 6/15/2027
Bank of America Corp.   VAR% 6/19/2041
Citibank NA   3.4% 7/23/2021
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.04% 0.13% 3.78% 12.25% 6.22% 9.98%
Construction 0.04% 0.04% 2.63% 7.92% 5.29% 8.63%
Manufacturing 0.10% 0.19% 2.67% 5.97% 8.16% 12.06%
Transportion, Communication, Electric/Gas 0.10% 0.15% 3.61% 7.05% 9.98% 14.53%
Wholesale -0.00% 0.32% 2.13% 6.66% 6.07% 11.08%
Retail 0.09% 0.01% 2.74% 5.90% 9.50% 14.57%
Finance, Insurance, Real-Estate 0.06% 0.15% 1.70% 4.91% 6.17% 9.51%
Services 0.09% 0.10% 2.58% 5.60% 7.56% 11.43%
Public Administration 0.02% 0.24% 0.30% 0.81% 4.81% 5.55%
Energy 0.03% 0.07% 3.30% 12.01% 5.22% 9.35%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Highwoods Realty LP (USD) 2.6% 2/1/2031 (07/30/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.591, Yielding 2.64%.

2. Enterprise Products Operating LLC (USD) 3.2% 2/15/2052 (07/30/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.233, Yielding 3.24%.

3. Truist Financial Corp. (USD) 1.125% 8/3/2027 (07/30/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.839, Yielding 1.15%.

4. Fedex Corp. 2020-1 Class Aa Pass Through Trust (USD) 1.875% 2/20/2034 (07/30/2020): 970MM First Lien Notes, Price at Issuance 100, Yielding 1.88%.

Additional Commentary

NEW ISSUANCE WATCH: on 07/31/2020 participants welcome a $400MM new corporate-bond offering by
Highwoods Realty LP .
Top Widening Loans Top Narrowing Loans
Petco Animal Supplies Inc. (USD) TLB1 L+325 01/26/2023
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
Duravant LLC (USD) TL2 L+725 07/25/2025
Tacala LLC (USD) TLB L+350 02/05/2027
Verifone Inc. (USD) TL L+400 08/20/2025
Colfax Corp. (USD) TLA1 L+150 12/06/2024
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Tecomet Inc. (USD) TL L+350 05/01/2024
Albertsons LLC (USD) TL L+275 11/17/2025
Ball Corp. (USD) TLA L+150 03/21/2024

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 16 bp (basis points), as of 07/31/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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