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North American Bond Research – June 19, 2020

Posted on June 19, 2020
HIGH YIELD BOND RESEARCH
June 19, 2020
Bond Markets

MARKETS STARTED WAY UP BUT GAVE UP GAINS AS CORONAVIRUS FEARS SAPPED UP THE MARKET BULLS CHARGE.  MARKETS ENDED SLIGHTLY HIGHER FOR THE WEEK. 10 Year Treasury notes were UP .3 basis points. S&P -0.56%, Dow -0.8%, NASDAQ +0.03%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 8.7 MILLION+ CASES AND 460000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.3 MILLION+ CASES AND 121000+ 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. 3.5% 8/1/2050 +1.2%
  Pacific Gas & Electric Co. 2.5% 2/1/2031 +0.0%
  Pacific Gas & Electric Co. 3.3% 12/1/2027 +0.2%
  Pacific Gas & Electric Co. 1.75% 6/16/2022 +0.1%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.2%
–   Pacific Gas & Electric Co. 4.3% 3/15/2045 -0.3%
  Micron Technology Inc. 4.975% 2/6/2026 -0.3%
  Citigroup Inc. 6.125% PERP -1.1%
  Becton Dickinson & Co. 3.7% 6/6/2027 -0.1%
  T-Mobile USA Inc. 4.75% 2/1/2028 -0.7%
Pacific Gas & Electric Co.   3.5% 8/1/2050
Pacific Gas & Electric Co.   2.5% 2/1/2031
Pacific Gas & Electric Co.   3.3% 12/1/2027
Pacific Gas & Electric Co.   1.75% 6/16/2022
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Pacific Gas & Electric Co.   4.3% 3/15/2045
DCP Midstream Operating LP   5.625% 7/15/2027
Pacific Gas & Electric Co.   6.05% 3/1/2034
Ford Motor Co.   9% 4/22/2025
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.01% 0.23% 3.37% 13.26% 1.84% 7.15%
Mining -0.39% 0.47% 19.12% 25.90% -15.46% -8.96%
Construction 0.03% 0.67% 5.71% 6.81% -0.04% 6.42%
Manufacturing -0.08% 0.69% 6.94% 10.16% -1.21% 5.26%
Transportion, Communication, Electric/Gas -0.11% 0.69% 4.68% 14.80% 1.65% 7.18%
Wholesale -0.14% 0.40% 6.77% 17.96% -0.55% 4.49%
Retail -0.14% 0.47% 8.75% 8.71% -2.96% 2.77%
Finance, Insurance, Real-Estate -0.02% 0.73% 6.47% 7.80% -1.67% 4.69%
Services -0.14% 0.62% 6.68% 11.27% -1.38% 5.29%
Public Administration -0.08% 0.94% 6.81% 17.42% 1.08% 7.88%
Energy -0.34% 0.75% 17.58% 30.38% -12.50% -6.84%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. PG&E Corp. (USD) 5% 7/1/2028 (06/18/2020): 1000MM First Lien Notes, Price at Issuance 100, Yielding 5%.

2. T-Mobile USA Inc. (USD) 2.55% 2/15/2031 REGS (06/18/2020): 1750MM Secured Notes, Price at Issuance 99.793, Yielding 2.57%.

3. T-Mobile USA Inc. (USD) 1.5% 2/15/2026 Reg S (06/18/2020): 1000MM Secured Notes, Price at Issuance 99.832, Yielding 1.53%.

4. Abercrombie & Fitch Co. (USD) 8.75% 7/15/2025 Reg S (06/18/2020): 350MM Secured Notes, Price at Issuance 100, Yielding 8.75%.

5. T-Mobile USA Inc. (USD) 2.05% 2/15/2028 Reg S (06/18/2020): 1250MM Secured Notes, Price at Issuance 99.787, Yielding 2.08%.

6. Century Aluminum Inc. (USD) 12% 7/1/2025 Reg S (06/18/2020): 250MM Secured Notes, Price at Issuance 99, Yielding 12.27%.

7. PG&E Corp. (USD) 5.25% 7/1/2030 (06/18/2020): 1000MM First Lien Notes, Price at Issuance 100, Yielding 5.25%.

8. Gartner Inc. (USD) 4.5% 7/1/2028 Reg S (06/18/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

9. T-Mobile USA Inc. (USD) 2.55% 2/15/2031 144A (06/18/2020): 1750MM Secured Notes, Price at Issuance 99.793, Yielding 2.57%.

10. T-Mobile USA Inc. (USD) 1.5% 2/15/2026 144A (06/18/2020): 1000MM Secured Notes, Price at Issuance 99.832, Yielding 1.53%.

1. Whole Earth Brands (ACT II GLOBAL ACQUISTION CORP.):: $235 MM credit facilities: $50MM reolver; $185MM term A

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

3. Neenah Inc.: $200MM covenant-lite TLB (Ba3/BBB-)

4. Mohegan Tribal Gaming Authority: $100MM first lein TL (Caa1)

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

6. Blucora Inc.: $175MM add-on senior secured TL (BB)

7. Martin Midstream Partners LP: $400MM senior secured notes

8. Martin Midstream Partners LP: $400MM senior secured notes

9. Lummus Technology Inc. : $460MM senior notes (Caa1/B-)

10. Whole Earth Brands (ACT II GLOBAL ACQUISTION CORP.):: $235 MM credit facilities: $50MM reolver; $185MM term A

Additional Commentary

NEW ISSUANCE WATCH: T-Mobile USA Inc. issued $2750MM in notes.
Top Widening Loans Top Narrowing Loans
Vistra Group LTD (USD) TL2 L+725 10/26/2023
Casper Bidco (EUR) TL E+850 07/30/2027
Distributed Power Inc. (EUR) TL E+800 11/02/2026
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
GOL LuxCo SA (USD) TL 6.5% 08/31/2020
Syncreon Group BV (USD) TL 10/01/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Endemol (USD) TL L+900 08/13/2022
Flint Group (USD) TLB2 L+300 09/07/2021

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 06/19/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
June 19, 2020
Bond Markets

MARKETS STARTED WAY UP BUT GAVE UP GAINS AS CORONAVIRUS FEARS SAPPED UP THE MARKET BULLS CHARGE.  MARKETS ENDED SLIGHTLY HIGHER FOR THE WEEK. 10 Year Treasury notes were UP .3 basis points. S&P -0.56%, Dow -0.8%, NASDAQ +0.03%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 8.5 MILLION+ CASES AND 455000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.25 MILLION+ CASES AND 121000+ 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. 3.5% 8/1/2050 +1.2%
  CVS Health Corp. 4.3% 3/25/2028 +0.3%
  Pacific Gas & Electric Co. 3.3% 8/1/2040 +0.3%
  CVS Health Corp. 3.75% 4/1/2030 +0.7%
  Bank of America Corp. VAR% 6/19/2041 +0.3%
–   Boeing Co. 5.04% 5/1/2027 -0.8%
  Amazon.com Inc. 2.7% 6/3/2060 -0.3%
  Boeing Co. 4.875% 5/1/2025 -0.1%
  Amdocs LTD 2.538% 6/15/2030 -0.0%
  American Intl Group Inc. 3.4% 6/30/2030 -0.1%
Pacific Gas & Electric Co.   3.5% 8/1/2050
CVS Health Corp.   4.3% 3/25/2028
Boeing Co.   5.04% 5/1/2027
Amazon.com Inc.   2.7% 6/3/2060
Pacific Gas & Electric Co.   3.3% 8/1/2040
CVS Health Corp.   3.75% 4/1/2030
Bank of America Corp.   VAR% 6/19/2041
Waste Management Inc.   2.95% 6/15/2024
Oracle Corp.   3.6% 4/1/2050
Boeing Co.   4.875% 5/1/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.01% 0.39% 6.88% 15.78% 1.59% 7.56%
Construction 0.32% 0.91% 5.25% 8.12% 2.21% 6.59%
Manufacturing 0.08% 0.49% 3.21% 9.18% 4.98% 10.52%
Transportion, Communication, Electric/Gas 0.16% 0.52% 4.17% 13.78% 5.91% 12.52%
Wholesale 0.10% 0.77% 4.75% 6.56% 4.06% 10.82%
Retail 0.09% 0.34% 3.70% 10.42% 5.88% 12.33%
Finance, Insurance, Real-Estate 0.08% 0.47% 3.04% 7.18% 4.13% 8.49%
Services 0.12% 0.69% 3.59% 8.57% 4.59% 9.79%
Public Administration 0.01% 0.02% 0.10% 1.35% 4.23% 5.36%
Energy 0.04% 0.49% 7.18% 17.59% 2.10% 8.00%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Vereit Operating Partnership (USD) 3.4% 1/15/2028 (06/18/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.144, Yielding 3.53%.

2. E-L Financial Corp. LTD. (CAD) 4% 6/22/2050 (06/18/2020): 200MM Senior Unsecured Notes, Price at Issuance 99.48, Yielding 4.03%.

3. T-Mobile USA Inc. (USD) 1.5% 2/15/2026 144A (06/18/2020): 1000MM Secured Notes, Price at Issuance 99.832, Yielding 1.53%.

4. The Ford Foundation (USD) 2.415% 6/1/2050 (06/18/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding 2.42%.

5. The Ford Foundation (USD) 2.815% 6/1/2070 (06/18/2020): 700MM Unsecured Notes, Price at Issuance 100, Yielding 2.82%.

Additional Commentary

NEW ISSUANCE WATCH: on 06/19/2020 participants welcome an $80MM new corporate-bond offering by Idaho Power Corp.
Top Widening Loans Top Narrowing Loans
Vistra Group LTD (USD) TL2 L+725 10/26/2023
Casper Bidco (EUR) TL E+850 07/30/2027
Distributed Power Inc. (EUR) TL E+800 11/02/2026
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
GOL LuxCo SA (USD) TL 6.5% 08/31/2020
Syncreon Group BV (USD) TL 10/01/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Endemol (USD) TL L+900 08/13/2022
Flint Group (USD) TLB2 L+300 09/07/2021

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 06/19/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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