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North American Bond Research – March 25, 2020

Posted on March 25, 2020
HIGH YIELD BOND RESEARCH
March 25, 2020
Bond Markets

MARKETS WERE UP FOR THE MOST PART DUE TO THE SENATE PASSING THE $2 TRILLION DOLLAR AID PACKAGE. CORONAVIRUS STILL WEIGHING ON THE MARKET THAT THERE IS A LOT TO COME. 10 Year Treasury notes were down 14.7 basis points. S&P +1.15%, Dow +2.39%, NASDAQ -0.45%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 466000+ CASES AND 21000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 65000+ CASES AND 920+ DEATHS.    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
+   BNP Paribas VAR% PERP 144A +4.9%
  HCA Inc. 3.5% 9/1/2030 +9.5%
  Netflix Inc. 5.875% 11/15/2028 +1.6%
  Altice Financing SA 7.5% 5/15/2026 144A +9.4%
  Numericable-SFR SA 7.375% 5/1/2026 144A +5.3%
–   Sally Hldg LLC 5.625% 12/1/2025 -0.9%
  Bombardier Inc. 8.75% 12/1/2021 144A -1.9%
  Ladder Capital Finance LLC 4.25% 2/1/2027 144A -1.7%
  Lennar Corp. 6.25% 12/15/2021 (1) -0.5%
  Cenovus Energy Inc. 6.75% 11/15/2039 (1) -1.8%
BNP Paribas   VAR% PERP 144A
HCA Inc.   3.5% 9/1/2030
Netflix Inc.   5.875% 11/15/2028
Sally Hldg LLC   5.625% 12/1/2025
Altice Financing SA   7.5% 5/15/2026 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.59% -6.29% -20.43% -18.61% -18.72% -8.98%
Mining -0.04% -14.94% -41.74% -41.36% -42.53% -34.05%
Construction -1.00% -7.38% -13.79% -11.44% -11.50% -0.48%
Manufacturing 0.05% -8.59% -17.81% -16.15% -16.13% -6.38%
Transportion, Communication, Electric/Gas 0.66% -8.25% -18.49% -16.51% -16.57% -6.69%
Wholesale -0.20% -7.23% -17.50% -16.33% -16.52% -7.27%
Retail -0.09% -9.33% -19.48% -17.96% -18.16% -3.94%
Finance, Insurance, Real-Estate -0.00% -8.95% -17.10% -15.33% -15.44% -4.74%
Services 0.05% -8.84% -18.54% -17.34% -17.42% -6.40%
Public Administration -0.82% -7.02% -19.93% -16.87% -17.13% -9.30%
Energy -0.13% -14.68% -42.01% -41.42% -42.64% -35.07%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 03/25/2020)
1. AVI-SPL: $370MM covenant lite TLB (B2/B)

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

3. CJ Foods Inc.: $285MM TLB

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: No new issues  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
McDermott International Inc. (USD) DD L+1000 10/21/2021
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Mcjunkin Red Man Corp. (USD) TLB L+275 09/20/2024
WCA Waste Corp. (USD) TLB L+250 08/12/2023
LGC LTD (EUR) TLB E+400 03/08/2023
Citco Group LTD (USD) TL L+250 09/17/2023
Janus International Group LLC (USD) TL L+375 02/07/2025
Merrill Communications LLC (USD) TLB L+500 09/26/2026
Brooks Automation Inc. (USD) TLB L+300 10/04/2024
Tibco Software Inc. (USD) TLB L+400 07/03/2026

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  123.87 bp (basis points), as of 03/25/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
March 25, 2020
Bond Markets

MARKETS WERE UP FOR THE MOST PART DUE TO THE SENATE PASSING THE $2 TRILLION DOLLAR AID PACKAGE. CORONAVIRUS STILL WEIGHING ON THE MARKET THAT THERE IS A LOT TO COME. 10 Year Treasury notes were down 14.7 basis points. S&P +1.15%, Dow +2.39%, NASDAQ +-0.45%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 466000+ CASES AND 21000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 65000+ CASES AND 920+ DEATHS.    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
+   Wells Fargo & Co. 5.013% 4/4/2051 +8.2%
  JP Morgan Chase & Co. 4.493% 3/24/2031 +2.6%
  McDonald’s Corp. 3.625% 9/1/2049 +2.1%
  PepsiCo. Inc. 3.625% 3/19/2050 +8.9%
  Anheuser-Busch Inbev Worldwide Inc. 4.9% 2/1/2046 +9.8%
–   Walt Disney Co. 4.625% 3/23/2040 -1.1%
  Gilead Sciences Inc. 2.55% 9/1/2020 -0.1%
  Caterpillar Financial Services Corp. FLT% 3/15/2021 -0.5%
  Marathon Oil Corp. 4.4% 7/15/2027 -12.9%
  Hospitality Properties Trust 5.25% 2/15/2026 -9.8%
Wells Fargo & Co.   5.013% 4/4/2051
Lowe’s Companies Inc.   5.125% 4/15/2050
JP Morgan Chase & Co.   4.493% 3/24/2031
McDonald’s Corp.   3.625% 9/1/2049
PepsiCo. Inc.   3.625% 3/19/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.68% -3.95% -7.88% -5.03% -4.84% 4.74%
Mining -0.52% -9.60% -20.36% -17.94% -18.10% -6.57%
Construction -1.53% -7.53% -12.45% -9.57% -9.60% -0.99%
Manufacturing 0.45% -4.73% -8.67% -5.84% -5.98% 3.05%
Transportion, Communication, Electric/Gas 0.19% -5.39% -11.90% -8.34% -8.39% 1.80%
Wholesale -0.18% -5.43% -8.86% -6.33% -6.48% 2.03%
Retail 0.53% -5.22% -9.31% -6.25% -6.36% 2.90%
Finance, Insurance, Real-Estate 0.15% -3.83% -7.08% -4.70% -4.86% 2.37%
Services 0.46% -4.26% -8.41% -5.51% -5.63% 4.12%
Public Administration -0.00% 0.28% 1.89% 3.32% 3.20% 6.01%
Energy -0.42% -9.01% -20.45% -17.87% -17.99% -7.98%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Kimberly-Clark Corp. (USD) 3.1% 3/26/2030 (03/24/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.923, Yielding 3.11%.

2. Florida Power & Light (USD) 2.85% 4/1/2025 (03/24/2020): 1100MM Senior Secured Notes, Price at Issuance 99.898, Yielding 2.87%.

3. Comcast Corp. (USD) 3.1% 4/1/2025 (03/24/2020): 800MM Senior Unsecured Notes, Price at Issuance 99.949, Yielding 3.11%.

4. Comcast Corp. (USD) 3.3% 4/1/2027 (03/24/2020): 800MM Senior Unsecured Notes, Price at Issuance 99.73, Yielding 3.34%.

5. Comcast Corp. (USD) 3.4% 4/1/2030 (03/24/2020): 1600MM Senior Unsecured Notes, Price at Issuance 99.823, Yielding 3.42%.

6. Comcast Corp. (USD) 3.75% 4/1/2040 (03/24/2020): 800MM Senior Unsecured Notes, Price at Issuance 99.456, Yielding 3.79%.

7. Citigroup Inc. (USD) 4.412% 3/31/2031 (03/24/2020): 4000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.41%.

8. Lowe’s Companies Inc. (USD) 5% 4/15/2040 (03/24/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.533, Yielding 5.04%.

9. Lowe’s Companies Inc. (USD) 5.125% 4/15/2050 (03/24/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.814, Yielding 5.14%.

10. Chevron Phillips Chemical Co. LLC (USD) 5.125% 4/1/2025 144A (03/24/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.992, Yielding 5.13%.

Additional Commentary

NEW ISSUANCE WATCH: on 03/25/2020 participants welcome an $800MM new corporate-bond offering by ComcastThe 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
McDermott International Inc. (USD) DD L+1000 10/21/2021
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Mcjunkin Red Man Corp. (USD) TLB L+275 09/20/2024
WCA Waste Corp. (USD) TLB L+250 08/12/2023
LGC LTD (EUR) TLB E+400 03/08/2023
Citco Group LTD (USD) TL L+250 09/17/2023
Janus International Group LLC (USD) TL L+375 02/07/2025
Merrill Communications LLC (USD) TLB L+500 09/26/2026
Brooks Automation Inc. (USD) TLB L+300 10/04/2024
Tibco Software Inc. (USD) TLB L+400 07/03/2026

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 123.87 bp (basis points), as of 03/25/2020
  • 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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