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North American Bond Research – November 10, 2020

Posted on November 10, 2020
HIGH YIELD BOND RESEARCH
November 10, 2020
Bond Markets

EUROPEAN MARKETS HAD ANOTHER UPDAY WHILE THE US WAS MIXED. SMALL CAP JUMPED AS THE ELECTION AND COVID VACCINE SITUATION SORTING THEMSELVES OUT. 10 Year Treasury notes were up 2.9 bps. S&P -0.14%, Dow +0.90%, NASDAQ -1.37%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 51.75 MILLION+ CASES AND 1.28 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 10.5 MILLION+ CASES AND 246000+ 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
+   Vale Overseas LTD 3.75% 7/8/2030 +0.1%
  Oneok Inc. 7.5% 9/1/2023 +1.0%
  Continental Resources Inc. 4.375% 1/15/2028 +0.1%
  ARC Properties Operating Partnership LP 4.6% 2/6/2024 +0.1%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.4%
–   Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.2%
  Petrobras Global Finance BV 6.85% 6/5/2115 -1.1%
  General Motors Co. 5.2% 4/1/2045 -1.1%
  Occidental Petroleum Corp. 4.2% 3/15/2048 -1.8%
  Dish DBS Corp. 7.75% 7/1/2026 -1.6%
Vale Overseas LTD   3.75% 7/8/2030
Oneok Inc.   7.5% 9/1/2023
Continental Resources Inc.   4.375% 1/15/2028
Pacific Gas & Electric Co.   4.95% 7/1/2050
Petrobras Global Finance BV   6.85% 6/5/2115
ARC Properties Operating Partnership LP   4.6% 2/6/2024
General Motors Co.   5.2% 4/1/2045
Occidental Petroleum Corp.   4.2% 3/15/2048
Dish DBS Corp.   7.75% 7/1/2026
Pacific Gas & Electric Co.   4.55% 7/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.06% 0.89% 0.86% 1.06% 6.63% 8.43%
Mining 1.18% 4.17% 4.19% 50.07% -7.57% -4.16%
Construction 0.05% 1.00% 0.79% 3.11% 7.19% 8.90%
Manufacturing 0.25% 1.88% 1.76% 2.44% 5.28% 7.86%
Transportion, Communication, Electric/Gas 0.21% 1.58% 3.32% 3.12% 5.52% 7.40%
Wholesale 0.36% 1.06% 0.08% -0.69% 2.00% 3.97%
Retail 0.39% 1.82% 1.42% 4.52% 4.95% 6.92%
Finance, Insurance, Real-Estate 0.20% 1.48% 1.41% 3.01% 4.22% 5.99%
Services 0.44% 2.23% 1.85% 2.53% 5.29% 6.85%
Public Administration -0.35% 0.76% 0.63% 2.80% 8.62% 10.83%
Energy 1.17% 4.15% 3.80% 42.86% -6.33% -2.37%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Axalta Coating Systems US Holdings Inc. (USD) 3.375% 2/15/2029 (11/09/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

2. Sunoco LP (USD) 4.5% 5/15/2029 144A (11/09/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

3. Stericycle Inc. (USD) 3.875% 1/15/2029 144A (11/09/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

4. Allison Transmission Inc. (USD) 3.75% 1/30/2031 Reg S (11/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

5. Veritas US Inc / Veritas Bermuda Ltd (USD) 7.5% 9/1/2025 (11/09/2020): 750MM Secured Notes, Price at Issuance 102, Yielding 7%.

6. Axalta Coating Systems US Holdings Inc. (USD) 3.375% 2/15/2029 Reg S (11/09/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

7. Sunoco LP (USD) 4.5% 5/15/2029 Reg S (11/09/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

8. Stericycle Inc. (USD) 3.875% 1/15/2029 Reg S (11/09/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

9. Four Lakes RE LTD (USD) FLT% 1/5/2024 (11/09/2020): 100MM Unsecured Notes, Price at Issuance 100.

10. Four Lakes RE LTD (USD) FLT% 1/5/2024 (11/09/2020): 75MM Unsecured Notes, Price at Issuance 100.

1. American Public Education Inc.: $195MM credit facilities: $20MM revolver; $175MM TLB

2. Amentum Holdings LLC: $980MM TL (B1/B)

3. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

4. Greystone Select Financial: $400MM TLB (Ba2/B+/BB-)

5. Amentum Holdings LLC: $980MM TL (B1/B)

6. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

7. J.D. Power: $100MM incremental TL

8. Motorcity: $275MM TLB (Ba3/BB)

9. Les Schwab Tire Centers: $1.575MM TLB (B2/B)

10. Greystone Select Financial: $400MM TLB (Ba2/B+/BB-)

Additional Commentary

NEW ISSUANCE WATCH:    Axalta Coating Systems US Holdings Inc.  issued 700 MM in Notes. 
Top Widening Loans Top Narrowing Loans
MFG / MRH (GBP) TL2 06/21/2026
ADB Safegate (EUR) TLB E+350 10/02/2024
Sophos PLC (USD) TL L+825 10/14/2027
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Dorna Sports SL (USD) TLB2 L+350 04/12/2024
Promotora de Informaciones SA (EUR) TL3 E+400 12/31/2022
Imagina Media Audiovisual SL (EUR) TLB E+450 06/28/2025
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Cambrex Corp. (USD) TL2 L+900 12/04/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023

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 12 bps (basis points), as of 11/10/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 10, 2020
Bond Markets

EUROPEAN MARKETS HAD ANOTHER UPDAY WHILE THE US WAS MIXED. SMALL CAP JUMPED AS THE ELECTION AND COVID VACCINE SITUATION SORTING THEMSELVES OUT. 10 Year Treasury notes were up 2.9 bps. S&P -0.14%, Dow +0.90%, NASDAQ -1.37%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 51.75 MILLION+ CASES AND 1.28 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 10.5 MILLION+ CASES AND 246000+ 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
+   Boeing Co. 3.625% 2/1/2031 +0.9%
  Phillips 66 4.875% 11/15/2044 +2.2%
  Bank of America Corp. FLT% 10/24/2024 +0.1%
  Boeing Co. 5.15% 5/1/2030 +0.6%
  Boeing Co. 5.805% 5/1/2050 +0.5%
–   Bank of America Corp. VAR% 10/24/2031 -0.5%
  Johnson & Johnson 1.3% 9/1/2030 -0.7%
  Boeing Co. 3.25% 2/1/2028 -0.4%
  Alphabet Inc. 2.05% 8/15/2050 -1.0%
  Verizon Communications Inc. 3.15% 3/22/2030 -1.1%
Bank of America Corp.   VAR% 10/24/2031
Boeing Co.   3.625% 2/1/2031
Phillips 66   4.875% 11/15/2044
Bank of America Corp.   FLT% 10/24/2024
Johnson & Johnson   1.3% 9/1/2030
Boeing Co.   3.25% 2/1/2028
Alphabet Inc.   2.05% 8/15/2050
Verizon Communications Inc.   3.15% 3/22/2030
CVS Health Corp.   4.3% 3/25/2028
Boeing Co.   5.15% 5/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.46% 0.83% 0.81% -0.95% 5.93% 7.90%
Construction -0.21% 1.04% 1.64% 1.89% 6.59% 8.32%
Manufacturing -0.39% 0.72% 0.64% -0.57% 8.09% 9.54%
Transportion, Communication, Electric/Gas -0.71% 0.75% 0.62% -1.71% 8.92% 10.93%
Wholesale -0.21% 0.70% 1.18% 0.96% 8.29% 10.20%
Retail -0.53% 0.74% 0.64% -1.19% 9.60% 11.63%
Finance, Insurance, Real-Estate -0.27% 0.45% 0.57% 0.10% 6.94% 8.32%
Services -0.37% 0.48% 0.30% -0.60% 7.31% 8.66%
Public Administration -0.27% -0.00% -0.20% 0.02% 4.56% 5.07%
Energy -0.31% 1.04% 0.87% -1.30% 4.68% 7.01%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Bristol-Myers Squibb Co. (USD) 0.75% 11/13/2025 (11/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.838, Yielding .78%.

2. Republic Services Inc. (USD) 0.875% 11/15/2025 (11/09/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.898, Yielding .9%.

3. Caterpillar Financial Services Corp. (USD) 0.8% 11/13/2025 (11/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.873, Yielding .83%.

4. Bristol-Myers Squibb Co. (USD) 1.45% 11/13/2030 (11/09/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.833, Yielding 1.47%.

5. Ameren Illinois Co. (USD) 1.55% 11/15/2030 (11/09/2020): 375MM First Lien Notes, Price at Issuance 99.577, Yielding 1.6%.

6. Consolidated Edison Co of NY Inc (USD) 3% 12/1/2060 (11/09/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.398, Yielding 3.03%.

7. Morgan Stanley (USD) VAR% 11/10/2023 (11/09/2020): 1750MM Senior Unsecured Notes, Price at Issuance 100.

8. Morgan Stanley (USD) VAR% 2/13/2032 (11/09/2020): 2750MM Senior Unsecured Notes, Price at Issuance 100.

9. Vereit Operating Partnership (USD) 2.85% 12/15/2032 (11/09/2020): 700MM Senior Unsecured Notes, Price at Issuance 98.928, Yielding 2.96%.

10. Vereit Operating Partnership (USD) 2.2% 6/15/2028 (11/09/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.881, Yielding 2.36%.

Additional Commentary

NEW ISSUANCE WATCH:   Bristol-Myers Squibb Co. issued 1000MM in notes.
Top Widening Loans Top Narrowing Loans
MFG / MRH (GBP) TL2 06/21/2026
ADB Safegate (EUR) TLB E+350 10/02/2024
Sophos PLC (USD) TL L+825 10/14/2027
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Dorna Sports SL (USD) TLB2 L+350 04/12/2024
Promotora de Informaciones SA (EUR) TL3 E+400 12/31/2022
Imagina Media Audiovisual SL (EUR) TLB E+450 06/28/2025
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Cambrex Corp. (USD) TL2 L+900 12/04/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023

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 12 bps (basis points), as of 11/10/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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