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North American Bond Research – March 17, 2020

Posted on March 17, 2020
HIGH YIELD BOND RESEARCH
March 17, 2020
Bond Markets

MARKETS GET CRUSHED  AS GOVERNMENTS RACE TO FIGHT THE CORONAVIRUS AND SHORE UP FINANCIAL MARKETS AND ECONOMIES.  10 Year Treasury notes were up 26.9 basis points.  S&P +6%, Dow +5.2%, NASDAQ  6.23%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 200000+ CASES AND 8000+ DEATHS. THE VIRUS SEEMS TO BE SLOWING DOWN IN CHINA AS NEW CASES AND DEATHS SEEM TO BE ACCELERATING INTERNATIONALLY. 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
+   Uber Technologies Inc. 8% 11/1/2026 144A +0.3%
  Numericable-SFR SA 7.375% 5/1/2026 144A +0.8%
  CenturyLink Inc. 5.125% 12/15/2026 144A +1.7%
  T-Mobile USA Inc. 6.375% 3/1/2025 +1.5%
  Tesla Motors Inc. 5.3% 8/15/2025 144A +0.4%
–   Ally Financial Inc. 4.625% 3/30/2025 -2.8%
  Petrobras Global Finance BV 6.85% 6/5/2115 -1.8%
  Credit Agricole SA 8.125% PERP 144A -3.6%
  CSC Hldg LLC 5.75% 1/15/2030 144A -0.2%
  American Airlines Group Inc. 3.75% 3/1/2025 144A -0.0%
Uber Technologies Inc.   8% 11/1/2026 144A
Numericable-SFR SA   7.375% 5/1/2026 144A
Ally Financial Inc.   4.625% 3/30/2025
CenturyLink Inc.   5.125% 12/15/2026 144A
Petrobras Global Finance BV   6.85% 6/5/2115
Credit Agricole SA   8.125% PERP 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -2.21% -9.39% -12.03% -10.07% -10.46% 1.72%
Mining -3.76% -15.73% -32.23% -32.30% -33.04% -25.92%
Construction -1.13% -4.38% -5.93% -3.57% -3.76% 7.38%
Manufacturing -1.85% -6.33% -8.90% -6.65% -7.11% 2.01%
Transportion, Communication, Electric/Gas -2.52% -7.55% -10.69% -7.73% -8.56% 1.33%
Wholesale -2.10% -6.25% -10.03% -8.01% -8.62% -0.44%
Retail -2.71% -7.16% -10.53% -7.92% -9.08% 3.54%
Finance, Insurance, Real-Estate -1.79% -6.24% -8.54% -6.61% -6.99% 2.80%
Services -2.19% -6.57% -9.43% -7.57% -8.03% 2.07%
Public Administration -1.61% -10.74% -11.65% -8.23% -9.28% -0.36%
Energy -3.79% -16.45% -32.32% -31.56% -32.96% -26.15%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 03/17/2020)
1. Alpha Auto Group: $225MM notes

2. DDM Holding AG: ¬100MM

3. Qmax Financial Holdings Inc.: $225MM senior notes

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

5. Obsidian Energy Ltd.: $100MM

6. INTL Fcstone: $350MM senior secured notes

7. AVI-SPL: $370MM covenant lite TLB (B2/B)

8. Service Logic: $140MM bank debt: $40MM TL; $100MM DD TL

9. CJ Foods Inc.: $285MM TLB

10. Cornerstone Ondemand Inc.: $1.135MM senior secured credit facilities: $150MM revolver; $985MM TLB

Additional Commentary

NEW ISSUANCE WATCH: on 02/21/2020 participants welcome a $600MM new corporate-bond offering by
Mattamy Group.  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 Loans Top Narrowing Loans
Fusion Connect Inc. (USD) TL EXIT L+950 12/31/2049
Cision US Inc. (USD) TLB L+375 01/24/2027
Aviation Capital Group LLC (USD) RC L+100 06/03/2024
MA Financeco LLC (USD) TLB2 L+250 11/20/2021
SS&C Technologies Inc. (USD) TLB4 L+175 04/18/2025
Allnex Sarl (USD) TLB3 L+325 09/13/2023
Travel Leaders Group (USD) TLB L+400 01/25/2024
Jostens Inc. (USD) TL L+550 12/21/2025
Hillman Group Inc. (USD) TLB L+400 05/31/2025
Jane Street (USD) TLB L+300 01/07/2025

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  60 bp (basis points), as of 03/17/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
March 17, 2020
Bond Markets

MARKETS GET CRUSHED  AS GOVERNMENTS RACE TO FIGHT THE CORONAVIRUS AND SHORE UP FINANCIAL MARKETS AND ECONOMIES.  10 Year Treasury notes were up 26.9 basis points.  S&P +6%, Dow +5.2%, NASDAQ  6.23%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 200000+ CASES AND 8000+ DEATHS. THE VIRUS SEEMS TO BE SLOWING DOWN IN CHINA AS NEW CASES AND DEATHS SEEM TO BE ACCELERATING INTERNATIONALLY.     (Advantage Data Inc.). Extensive corporate-bond index data showed a net daily grade increment for high-grade versus high-yield constituents. High-yield bonds edged out high-grade debt as of 3 PM, London time.  Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,  Bombardier Inc. (USD) 7.5% 12/1/2024 Reg S made some analysts ‘Conviction buy’ lists. (See the chart for Bombardier Inc. bonds below). Pierre Robert
Key Gainers and Losers Volume Leaders
+   JPMorgan Chase & Co. 3.125% 1/23/2025 +3.8%
  Wells Fargo & Co. FLT% 1/24/2023 +3.7%
  Bank of America Corp. FLT% 4/24/2023 +1.8%
  Bank of America Corp. 3.004% 12/20/2023 +0.3%
–   CVS Health Corp. 5.05% 3/25/2048 -7.0%
  Abbvie Inc. 4.25% 11/21/2049 144A -8.3%
  Bank of America Corp. 2.496% 2/13/2031 -2.5%
  General Electric Co. FLT% PERP (1) -1.9%
CVS Health Corp.   5.05% 3/25/2048
Abbvie Inc.   4.25% 11/21/2049 144A
Bank of America Corp.   2.496% 2/13/2031
General Electric Co.   FLT% PERP (1)
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -1.06% -3.32% -3.70% -0.16% -0.72% 5.78%
Mining -0.59% -7.74% -10.44% -8.23% -8.59% 2.72%
Construction -0.36% -4.18% -3.62% -0.93% -1.16% 6.61%
Manufacturing -0.33% -4.21% -2.23% 0.06% -0.13% 9.50%
Transportion, Communication, Electric/Gas -0.54% -5.95% -4.34% -1.50% -1.59% 10.39%
Wholesale -0.30% -3.77% -2.60% -0.47% -0.83% 9.12%
Retail -0.31% -4.65% -2.53% -0.20% -0.35% 10.11%
Finance, Insurance, Real-Estate -0.44% -3.59% -2.09% -0.12% -0.33% 7.54%
Services -0.45% -4.60% -2.10% 0.26% 0.08% 9.65%
Public Administration 0.20% -0.17% 2.19% 3.23% 3.12% 6.40%
Energy -0.54% -7.91% -11.03% -8.86% -9.25% 1.52%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Verizon Communications Inc. (USD) 4% 3/22/2050 (03/17/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

2. Exxon Mobil Corp. (USD) 2.992% 3/19/2025 (03/17/2020): 150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.99%.

3. Bank of America Corp. (USD) VAR% 3/20/2051 (03/17/2020): 3000MM Senior Unsecured Notes, Price at Issuance 100.

4. Consumers Energy Co. (USD) 3.5% 8/1/2051 (03/17/2020): 575MM Secured Notes, Price at Issuance 99.606, Yielding 3.52%.

5. Union Electric Co. (USD) 2.95% 3/15/2030 (03/17/2020): 465MM Secured Notes, Price at Issuance 99.914, Yielding 2.96%.

6. Progressive Corp. (USD) 3.95% 3/26/2050 (03/17/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.148, Yielding 4%.

7. Verizon Communications Inc. (USD) 3.15% 3/22/2030 (03/17/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.693, Yielding 3.19%.

8. Verizon Communications Inc. (USD) 3% 3/22/2027 (03/17/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.95, Yielding 3.01%.

9. PepsiCo Inc. (USD) 2.75% 3/19/2030 (03/17/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.463, Yielding 2.81%.

Additional Commentary

NEW ISSUANCE WATCH: on 03/06/2020 participants welcome a $700MM new corporate-bond offering by Key BankThe 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 Loans Top Narrowing Loans
Fusion Connect Inc. (USD) TL EXIT L+950 12/31/2049
Cision US Inc. (USD) TLB L+375 01/24/2027
Aviation Capital Group LLC (USD) RC L+100 06/03/2024
MA Financeco LLC (USD) TLB2 L+250 11/20/2021
SS&C Technologies Inc. (USD) TLB4 L+175 04/18/2025
Allnex Sarl (USD) TLB3 L+325 09/13/2023
Travel Leaders Group (USD) TLB L+400 01/25/2024
Jostens Inc. (USD) TL L+550 12/21/2025
Hillman Group Inc. (USD) TLB L+400 05/31/2025
Jane Street (USD) TLB L+300 01/07/2025

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 60 bp (basis points), as of 03/17/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

 


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