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North American Bond Research – November 13, 2019

Posted on November 13, 2019
HIGH YIELD BOND RESEARCH
November 13, 2019
Bond Markets

JEROME POWELL TESTIFIED TO CONGRESS TODAY AND STATED the overall economy was on solid footing but that trade tensions had caused uncertainty in the economy. That uncertainty has caused businesses to delay investment. He also stated that the deficit was too high and that the US government should be pairing back debt. The 10-year note fell 3.9 basis points. S&P +0.08%, DOW +0.35%, NASDAQ -0.05%
PUBLIC IMPEACHMENT HEARINGS COMMENCED TODAY WITH BILL TAYLOR AND GEORGE KENT testifying. A new call revealed that Trump cared more about the investigation than Ukraine’s well being.  ADI proprietary index data showed a net yield increment for high-grade versus high-yield bondsHigh-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Ford Motor Co. (USD) 4% 5/20/2027 made analysts’ ‘Conviction Buy’ list. (See the chart below for Ford Motor Co. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.4%
  Goldman Sachs Group Inc. 5% PERP + 1.6%
–   Intelsat Luxembourg SA 8.125% 6/1/2023 -8.5%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 -1.4%
Intelsat Luxembourg SA   8.125% 6/1/2023
Embarq Corp.   7.995% 6/1/2036
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.11% 0.37% 0.29% 3.10% 18.62% 18.44%
Mining 0.09% -0.34% 0.17% -0.36% 5.43% 0.68%
Construction 0.11% -0.14% 0.36% 2.99% 15.22% 13.70%
Manufacturing 0.12% 0.27% 1.40% 2.60% 11.87% 9.74%
Transportion, Communication, Electric/Gas 0.04% -0.10% 0.11% 1.72% 14.06% 11.46%
Wholesale 0.06% 0.23% 0.31% 1.41% 12.08% 9.22%
Retail 0.07% 0.06% 0.74% 2.59% 15.64% 12.31%
Finance, Insurance, Real-Estate 0.07% 0.15% 0.99% 2.49% 13.84% 11.35%
Services 0.07% 0.05% 0.71% 2.74% 13.08% 10.79%
Public Administration 0.02% 0.02% 0.72% 1.53% 13.83% 15.05%
Energy 0.07% -0.41% -0.21% -0.65% 5.74% 1.36%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Sealed Air Corp. (USD) 4% 12/1/2027 144A (11/12/2019): 425MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

2. Scientific Games Intl. Inc. (USD) 7.25% 11/15/2029 144A (11/12/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%.

1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Presidio Inc.: $1.775B high yield bonds, Expected 4th Quarter 2019

Additional Commentary

NEW ISSUANCE WATCH: on 11/13/19 participants welcome a $425MM new corporate-bond offering by
Sealed Air Corp. The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/01/2019, with a net inflow of $940 Million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD XR14)
Ghana, Republic of (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD XR14)

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 35 bp (basis points), as of 11/13/19
  • Net positive capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 13, 2019
Bond Markets

JEROME POWELL TESTIFIED TO CONGRESS TODAY AND STATED the overall economy was on solid footing but that trade tensions had caused uncertainty in the economy. That uncertainty has caused businesses to delay investment. He also stated that the deficit was too high and that the US government should be pairing back debt. The 10-year note fell 3.9 basis points. S&P +0.08%, DOW +0.35%, NASDAQ -0.05%
PUBLIC IMPEACHMENT HEARINGS COMMENCED TODAY WITH BILL TAYLOR AND GEORGE KENT testifying. A new call revealed that Trump cared more about the investigation than Ukraine’s well being.  ADI proprietary index data showed a net yield increment for high-grade versus high-yield bondsHigh-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,  Abbvie Inc. (USD) 2.6% 11/21/2024  made analysts’ ‘Conviction Buy’ list. (See the chart below for Abbvie Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Abbvie Inc. 4.875% 11/14/2048 + 1.4%
  Fifth Third Bank Cincinnati OH 2.2% 10/30/2020 + 0.3%
–   Abbvie Inc. 4.25% 11/14/2028 -1.3%
  Equinor ASA 3.625% 9/10/2028 -0.4%
Abbvie Inc.   4.875% 11/14/2048
CVS Health Corp.   5.05% 3/25/2048
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.01% 0.12% 0.44% 0.66% 5.81% 6.50%
Mining 0.11% -0.13% -0.30% 0.09% 11.18% 11.96%
Construction 0.14% -0.12% -0.32% 0.01% 8.81% 10.26%
Manufacturing 0.09% -0.10% -0.01% 0.60% 10.73% 11.71%
Transportion, Communication, Electric/Gas 0.11% -0.22% -0.26% -0.04% 13.23% 14.92%
Wholesale 0.09% 0.01% 0.49% 1.37% 12.74% 12.74%
Retail 0.09% -0.10% -0.14% 0.39% 11.88% 13.15%
Finance, Insurance, Real-Estate 0.05% -0.09% 0.15% 0.60% 9.49% 10.76%
Services 0.08% -0.11% -0.19% 0.46% 10.60% 12.13%
Public Administration 0.01% -0.07% -0.10% 0.22% 4.27% 6.18%
Energy 0.09% -0.17% -0.25% -0.02% 11.57% 12.21%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Abbvie Inc. (USD) 2.6% 11/21/2024 Reg S (11/12/2019): 3750MM Senior Unsecured Notes, Price at Issuance 99.911, Yielding 2.62%.

2. BNP Paribas (USD) 2.819% 11/19/2025 144A (11/12/2019): 2000MM Senior Non Preferred Notes, Price at Issuance 100, Yielding 2.82%.

3. Abbvie Inc. (USD) 4.05% 11/21/2039 Reg S (11/12/2019): 4000MM Senior Unsecured Notes, Price at Issuance 99.647, Yielding 4.08%.

4. Abbvie Inc. (USD) 4.25% 11/21/2049 Reg S (11/12/2019): 5750MM Senior Unsecured Notes, Price at Issuance 99.563, Yielding 4.28%.

Additional Commentary

NEW ISSUANCE WATCH: on 11/05/19 participants welcome a $500MM new corporate-bond offering by
Xcel Energy Inc.The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/01/2019, with a net inflow of $940 Million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Weatherford International LTD (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
Ghana, Republic of (5Y Sen USD CR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

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 35 bp (basis points), as of 11/12/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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