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North American Bond Research – March 23, 2020

Posted on March 23, 2020
HIGH YIELD BOND RESEARCH
March 23, 2020
Bond Markets

THE SENATE FAILED TWICE TO PASS A STIMULUS PACKAGE WHICH ADDED TO THE MARKET’S ANXIETY. MASSACHUSETT’S GOVERNOR CHARLIE BAKER ISSUED A “STAY AT HOME” ORDER FOR ALL OF MASSACHUSETTS. 10 Year Treasury notes were down 14.7 basis points. S&P -2.93%, Dow -3.04%NASDAQ -0.27%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 375000+ CASES AND 16300+ DEATHS. THE VIRUS SEEMS TO BE DOWN TO A TRICKLE 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
+   Numericable-SFR SA 7.375% 5/1/2026 144A +1.7%
  Charter Communications Operating LLC 4.8% 3/1/2050 +7.7%
  Sabine Pass Liquefaction LLC 5.625% 3/1/2025 +0.1%
  TransDigm Inc. 6.25% 3/15/2026 144A +1.9%
–   Fidelity & Guaranty Life 5.5% 5/1/2025 144A -2.4%
  CCO Hldg LLC Cco Hldg Capital Corp. 5% 2/1/2028 144A -0.5%
  Frontier Communications Corp. 8.5% 4/1/2026 144A -0.9%
  HCA Inc. 5.375% 2/1/2025 -0.8%
Numericable-SFR SA   7.375% 5/1/2026 144A
Charter Communications Operating LLC   4.8% 3/1/2050
Sabine Pass Liquefaction LLC   5.625% 3/1/2025
TransDigm Inc.   6.25% 3/15/2026 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.41% -11.11% -18.71% -16.90% -17.11% -6.61%
Mining -3.81% -17.22% -40.38% -39.62% -40.86% -31.84%
Construction -0.81% -6.30% -10.02% -7.53% -7.61% 3.73%
Manufacturing -1.53% -8.10% -14.25% -12.39% -12.44% -2.86%
Transportion, Communication, Electric/Gas -2.21% -9.27% -16.90% -14.62% -14.94% -5.03%
Wholesale -1.15% -8.55% -15.48% -13.85% -14.17% -5.15%
Retail -1.97% -9.41% -16.65% -14.91% -15.21% -2.00%
Finance, Insurance, Real-Estate -1.75% -8.24% -14.06% -12.40% -12.55% -2.13%
Services -1.69% -8.15% -14.87% -13.38% -13.50% -2.67%
Public Administration 0.02% -8.45% -16.44% -13.12% -13.92% -5.50%
Energy -3.84% -17.00% -40.32% -39.36% -40.67% -32.30%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 03/20/2020)
1. AVI-SPL: $370MM covenant lite TLB (B2/B)

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

3. Championx: $537MM TL

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

5. Eldorado Resorts Inc./Caesars Entertainment Corp.: $6.4B credit facilities:$1B revolver at Eldorados; $3B seven-year cove-lite TLB due 2027 at Eldorado; $2.4B seven-year cove-lite TLB due 2027 at Caesars Resorts Collection

6. Innovate Xcessories & Services LLC: $695MM credit facilities: $75MM revolver; $620MM TL(B2/B)

7. Instructure: $825MM senior secured credit facilities: $50MM revolver; $775MM TL

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

9. Snapav: $390MM term loans: $290MM TL (B2); $100MM TL

10. Tata Chemicals North America Inc. : $380MM TL (Ba3)

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
AVSC Holding Corp. (USD) TLB L+450 09/19/2026
Advisor Group (USD) TLB L+500 08/01/2026
Mcjunkin Red Man Corp. (USD) TLB L+275 09/20/2024
Audio Visual Services Corp. (USD) TLB L+325 03/01/2025
Kingpin Intermediate Holdings LLC (USD) TLB L+350 07/03/2024
Jeld-Wen Inc. (USD) TLB4 L+200 12/15/2024
Oxea GmbH (USD) TL L+350 09/29/2024
Flying Fortress Inc. (USD) TLB L+175 10/30/2022
PDC Brands (USD) TL L+875 06/29/2025
Focus Financial Partners LLC (USD) TL L+200 07/03/2024

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  110 bp (basis points), as of 03/23/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
March 23, 2020
Bond Markets

THE SENATE FAILED TWICE TO PASS A STIMULUS PACKAGE WHICH ADDED TO THE MARKET’S ANXIETY. MASSACHUSETT’S GOVERNOR CHARLIE BAKER ISSUED A “STAY AT HOME” ORDER FOR ALL OF MASSACHUSETTS. 10 Year Treasury notes were down 14.7 basis points. S&P -2.93%, Dow -3.04%NASDAQ -0.27%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 375000+ CASES AND 16300+ DEATHS. THE VIRUS SEEMS TO BE DOWN TO A TRICKLE 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
+   Bank of America Corp. 2.496% 2/13/2031 +2.0%
  Bank of America Corp. FLT% 7/21/2021 +1.7%
  CVS Health Corp. 5.05% 3/25/2048 +5.1%
  General Electric Co. FLT% PERP (1) +0.7%
  Walt Disney Co. 4.7% 3/23/2050 +5.6%
–   American Express Co. 2.2% 10/30/2020 -0.5%
  Key Bank NA 1.25% 3/10/2023 -0.4%
  Hospitality Properties Trust 4.65% 3/15/2024 -1.7%
  JP Morgan Chase & Co. 4.6% PERP -0.4%
  PNC Financial Services Group Inc. 2.55% 1/22/2030 -2.3%
Bank of America Corp.   2.496% 2/13/2031
Bank of America Corp.   FLT% 7/21/2021
CVS Health Corp.   5.05% 3/25/2048
General Electric Co.   FLT% PERP (1)
Walt Disney Co.   4.7% 3/23/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.61% -5.13% -7.05% -4.31% -4.22% 4.66%
Mining -0.68% -9.74% -18.65% -16.47% -16.71% -4.73%
Construction 0.08% -5.12% -7.78% -5.05% -5.20% 4.01%
Manufacturing -0.51% -6.89% -8.98% -6.50% -6.73% 3.37%
Transportion, Communication, Electric/Gas 0.17% -8.24% -12.17% -9.00% -9.18% 2.14%
Wholesale -0.59% -5.65% -7.75% -5.64% -5.86% 3.14%
Retail -0.23% -6.65% -8.93% -6.25% -6.47% 3.49%
Finance, Insurance, Real-Estate -0.34% -5.31% -6.95% -4.90% -5.11% 2.73%
Services -0.52% -6.97% -8.99% -6.47% -6.69% 3.77%
Public Administration 0.29% 0.02% 1.86% 3.05% 2.91% 6.11%
Energy -0.50% -9.20% -18.92% -16.58% -16.82% -6.12%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. NSTAR Electric Co. (USD) 3.95% 4/1/2030 (03/23/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.452, Yielding 4.02%.

2. Alexandria Real Estate Equities Inc. (USD) 4.9% 12/15/2030 (03/23/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.933, Yielding 4.91%.

3. Thermo Fisher Scientific Inc. (USD) 4.133% 3/25/2025 (03/23/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

4. Thermo Fisher Scientific Inc. (USD) 4.497% 3/25/2030 (03/23/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

5. General Dynamics Corp. (USD) 3.25% 4/1/2025 (03/23/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.555, Yielding 3.35%.

6. General Dynamics Corp. (USD) 3.625% 4/1/2030 (03/23/2020): 1000MM Senior Unsecured Notes, Price at Issuance 98.947, Yielding 3.75%.

7. General Dynamics Corp. (USD) 4.25% 4/1/2040 (03/23/2020): 750MM Senior Unsecured Notes, Price at Issuance 98.83, Yielding 4.34%.

8. Humana Inc. (USD) 4.5% 4/1/2025 (03/23/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.875, Yielding 4.53%.

9. General Dynamics Corp. (USD) 4.25% 4/1/2050 (03/23/2020): 750MM Senior Unsecured Notes, Price at Issuance 98.53, Yielding 4.34%.

10. Humana Inc. (USD) 4.875% 4/1/2030 (03/23/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.788, Yielding 4.9%.

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
AVSC Holding Corp. (USD) TLB L+450 09/19/2026
Diplomat Pharmacy Inc. (USD) TLA L+250 12/20/2022
Audio Visual Services Corp. (USD) TLB L+325 03/01/2025
United Site Services Inc (USD) TL2 L+775 08/25/2025
Arbor Pharmaceuticals LLC (USD) TLB L+500 07/05/2023
Vizient Inc. (USD) TLB L+275 05/06/2026
American Traffic Solutions (USD) TLB L+375 03/01/2025
Excelitas Technologies Corp. (USD) TL2 L+750 12/01/2025
Mitchell Intl. Inc. (USD) TL2 L+725 11/07/2025
American Greetings Corp. (USD) TLB L+450 04/06/2024

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 110 bp (basis points), as of 03/23/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2020 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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