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North American Bond Research – March 5, 2020

Posted on March 5, 2020
HIGH YIELD BOND RESEARCH
March 5, 2020
Bond Markets

EUROPEAN AND US MARKETS ARE TUMBLING AFTER SPREAD OF VIRUS AND STATE OF EMERGENCY ARE SPREADING! LOSS OF REVENUE FROM MANUFACTURING, TRAVEL, HOTEL, AND RETAIL ARE WEIGHING ON THE MARKETS AS TO HOW DO WE RESTART THESE INDUSTRIES? 10 year Treasury notes were down 6.6 basis points.  S&P -3.39%, Dow -3.58%, NASDAQ  -3.10%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 94000+ CASES AND 3200+ 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
+   Ally Financial Inc. 4.125% 2/13/2022 +0.2%
  Private Export Funding Corp. 1.75% 11/15/2024 +2.1%
  Ally Financial Inc. 4.625% 3/30/2025 +0.3%
–   AMC Entertainment Hldg Inc. 5.75% 6/15/2025 -6.2%
  American Airlines Group Inc. 5% 6/1/2022 Reg S -6.8%
  Petrobras Global Finance BV 6.85% 6/5/2115 -3.0%
AMC Entertainment Hldg Inc.   5.75% 6/15/2025
American Airlines Group Inc.   5% 6/1/2022 Reg S
Petrobras Global Finance BV   6.85% 6/5/2115
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.57% -0.81% -0.02% 2.91% 1.18% 15.57%
Mining 0.47% -3.28% -5.99% -3.18% -8.09% -3.61%
Construction 0.35% -0.19% 0.52% 2.57% 1.80% 13.11%
Manufacturing 0.37% -0.43% 0.11% 2.61% 1.17% 9.86%
Transportion, Communication, Electric/Gas 0.50% -0.23% 1.06% 3.57% 1.89% 11.85%
Wholesale 0.26% -0.38% -0.63% 2.24% 0.55% 8.92%
Retail 0.44% -0.64% -0.39% 2.31% 0.55% 11.37%
Finance, Insurance, Real-Estate 0.43% -0.23% 0.10% 2.44% 1.18% 10.81%
Services 0.37% -0.51% -0.05% 2.09% 0.70% 9.61%
Public Administration 0.31% -0.70% 1.66% 4.01% 2.56% 13.00%
Energy 0.52% -2.91% -5.22% -1.75% -6.71% -1.78%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. CCO Hldg LLC Cco Hldg Capital Corp. (USD) 4.5% 5/1/2032 Reg S (03/04/2020): 1400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

2. Science Applications (USD) 4.875% 4/1/2028 (03/04/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

3. CCO Hldg LLC Cco Hldg Capital Corp. (USD) 4.5% 8/15/2030 (03/05/2020): 1100MM Senior Unsecured Notes, Price at Issuance 102.5, Yielding 4.2%.

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

2. Xperi Corp. : $1.1B seven-year secured covenant lite TLB

3. Thryv Inc. : $1.06B credit facilities: $200MM Revolver; $860MM TL

4. Tosca Services LLC: $325MM seven-year first-lien TL (B2/B)

5. 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
Technicolor (EUR) TLB E+300 12/31/2023
Tivity Health Inc. (USD) TLB L+525 03/08/2026
Novacap SA (EUR) TLB E+350 06/22/2023
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022
Alorica (USD) TL L+375 06/30/2022
Orion EngineeRed Carbons Hldgs GmbH (USD) TLB L+200 07/25/2024
ZPG PLC (GBP) TL L+750 07/12/2026
Cineworld Group PLC (EUR) TLB E+262.5 02/22/2025

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 15 bp (basis points), as of 02/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
March 5, 2020
Bond Markets

EUROPEAN AND US MARKETS ARE TUMBLING AFTER SPREAD OF VIRUS AND STATE OF EMERGENCY ARE SPREADING! LOSS OF REVENUE FROM MANUFACTURING, TRAVEL, HOTEL, AND RETAIL ARE WEIGHING ON THE MARKETS AS TO HOW DO WE RESTART THESE INDUSTRIES? 10 year Treasury notes were down 6.6 basis points.  S&P -3.39%, Dow -3.58%, NASDAQ  -3.10%.
CORONA VIRUS UPDATE: CHINA TO DATE HAS HAD 94000+ CASES AND 3200+ 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
+   CVS Health Corp. 5.05% 3/25/2048 +1.1%
  Southern California Edison Co. 3.65% 2/1/2050 +0.9%
  Citigroup Inc. 3.98% 3/20/2030 +0.3%
–   GE Capital Intl. Funding Co. 4.418% 11/15/2035 -0.2%
  General Electric Co. FLT% PERP (1) -1.2%
  HCA Inc. 4.125% 6/15/2029 -0.2%
CVS Health Corp.   5.05% 3/25/2048
Southern California Edison Co.   3.65% 2/1/2050
Citigroup Inc.   3.98% 3/20/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.28% 0.53% 1.38% 4.52% 3.52% 6.33%
Mining 0.34% -0.23% 1.12% 3.41% 2.63% 12.73%
Construction 0.23% 0.50% 1.79% 4.14% 4.02% 12.65%
Manufacturing 0.26% 1.00% 2.22% 4.37% 4.17% 14.07%
Transportion, Communication, Electric/Gas 0.34% 1.03% 2.63% 5.40% 5.21% 18.04%
Wholesale 0.24% 0.76% 1.84% 4.17% 3.69% 14.88%
Retail 0.28% 1.05% 2.42% 4.57% 4.37% 15.89%
Finance, Insurance, Real-Estate 0.21% 0.85% 1.89% 3.71% 3.52% 11.96%
Services 0.26% 1.14% 2.40% 4.50% 4.33% 14.16%
Public Administration 0.17% 0.97% 1.52% 2.38% 2.45% 5.91%
Energy 0.34% -0.29% 1.22% 3.58% 2.58% 13.02%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. eBay Inc. (USD) 1.9% 3/11/2025 (03/04/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.782, Yielding 1.95%.

2. eBay Inc. (USD) 2.7% 3/11/2030 (03/04/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.843, Yielding 2.72%.

3. 407 Intl. Inc. (CAD) 2.84% 3/7/2050 (03/04/2020): 700MM Secured Notes, Price at Issuance 99.859, Yielding 2.85%.

4. Berkshire Hathaway Finance Corp. (USD) 1.85% 3/12/2030 (03/04/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.9, Yielding 1.86%.

5. L3Harris Tech Inc. (USD) FLT% 3/10/2023 (03/04/2020): 250MM Senior Unsecured Notes, Price at Issuance 100.

6. Newmont Goldcorp Corp. (USD) 2.25% 10/1/2030 (03/04/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.108, Yielding 2.35%.

7. Healthcare Realty Trust Inc. (USD) 2.4% 3/15/2030 (03/04/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.665, Yielding 2.44%.

8. JM Smucker (USD) 3.55% 3/15/2050 (03/04/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.615, Yielding 3.57%.

9. JM Smucker (USD) 2.375% 3/15/2030 (03/04/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.876, Yielding 2.39%.

10. John Deere Capital Corp. (USD) 1.2% 4/6/2023 (03/04/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.976, Yielding 1.21%.

Additional Commentary

NEW ISSUANCE WATCH: on 02/202020 participants welcome a $750MM new corporate-bond offering by Citrix SystemsThe 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
Technicolor (EUR) TLB E+300 12/31/2023
Tivity Health Inc. (USD) TLB L+525 03/08/2026
Novacap SA (EUR) TLB E+350 06/22/2023
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022
AP Exhaust Acquisition LLC (USD) TL PIK A1 L+500 05/10/2025
West Corp. (USD) TL L+400 10/10/2024
Anvil Intl. (USD) TL L+500 05/28/2026
Alorica (USD) TL L+375 06/30/2022
Orion EngineeRed Carbons Hldgs GmbH (USD) TLB L+200 07/25/2024
ZPG PLC (GBP) TL L+750 07/12/2026
Cineworld Group PLC (EUR) TLB E+262.5 02/22/2025
Dayco Products LLC (USD) TLB L+425 05/19/2023
Saphilux Sarl (EUR) TLB E+375 07/19/2025

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 15 bp (basis points), as of 02/28/2020
  • 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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