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North American Bond Research – November 22, 2019

Posted on November 22, 2019
HIGH YIELD BOND RESEARCH
November 22, 2019

Bond Markets

TRUMP IMPEACHMENT PUBLIC HEARING ARE OVER AND NOW THREE HOUSE COMMITTEES ARE DRAFTING REPORTS THAT WILL BE FORWARDED TO THE HOUSE JUDICIARY COMMITTEES. The House Judiciary Committee will then draft the articles of impeachment if they find grounds for impeachment. The expected vote would come as early as Christmas or as late as mid-January 2020. The 10-year note gained .2 basis points. S&P+0.22%, DOW +0.39%, NASDAQ +0.16%.

MARKETS UP DUE TO POSITIVE COMMENTS MADE BY CHINESE LEADER XI JINPING. Next week US and Chinese representatives will meet in another round of trade talks. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.625% 3/1/2097 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Petrobras Global Finance BV 6.85% 6/5/2115 + 1.8%
  Quad Graphics Inc. 7% 5/1/2022 + 4.3%
–   Intelsat Luxembourg SA 8.125% 6/1/2023 -2.4%
  Netflix Inc. 4.375% 11/15/2026 -0.0%
Petrobras Global Finance BV   6.85% 6/5/2115
Intelsat Luxembourg SA   8.125% 6/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.14% -0.10% 0.12% 3.18% 17.63% 18.91%
Mining -0.15% -0.93% -0.85% -2.20% 4.75% 2.17%
Construction 0.03% 0.07% 0.05% 2.39% 15.40% 14.90%
Manufacturing -0.05% -0.02% 0.62% 1.96% 11.96% 11.06%
Transportion, Communication, Electric/Gas -0.08% -0.23% -0.37% 0.80% 12.77% 11.88%
Wholesale -0.03% -0.10% 0.01% 0.87% 11.85% 10.49%
Retail -0.07% -0.16% -0.32% 1.98% 15.43% 13.85%
Finance, Insurance, Real-Estate -0.02% 0.05% 0.54% 1.97% 13.97% 12.87%
Services -0.01% -0.03% 0.03% 1.77% 12.26% 11.43%
Public Administration -0.18% -0.27% 1.47% 0.86% 13.79% 16.11%
Energy -0.13% -0.86% -0.94% -2.21% 5.43% 3.29%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Centene Corp. (USD) 4.625% 12/15/2029 144A (11/21/2019): 3500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

2. Centene Corp. (USD) 4.75% 1/15/2025 144A (11/21/2019): 1000MM Senior Unsecured Notes, Price at Issuance 102.875, Yielding 4.12%.

3. Vici Properties LLC (USD) 4.625% 12/1/2029 Reg S (11/21/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

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

2. DDM Holding AG: ¬100MM, Expected Q4 2019

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

Additional Commentary

NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1175MM new corporate-bond offering by
Wolverine Ecrow The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 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 MR14)
Hertz Corp. (5Y Sen USD CR14)		 Ghana, Republic of (5Y Sen USD CR14)
Road King Infrastructure LTD (5Y Sen USD MR14)
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 11/22/19
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 22, 2019

Bond Markets

TRUMP IMPEACHMENT PUBLIC HEARING ARE OVER AND NOW THREE HOUSE COMMITTEES ARE DRAFTING REPORTS THAT WILL BE FORWARDED TO THE HOUSE JUDICIARY COMMITTEES. The House Judiciary Committee will then draft the articles of impeachment if they find grounds for impeachment. The expected vote would come as early as Christmas or as late as mid-January 2020. The 10-year note lost 2.2 basis points. S&P -0.16%, DOW -0.2%, NASDAQ -0.24%.

MARKETS UP DUE TO POSITIVE COMMENTS MADE BY CHINESE LEADER XI JINPING. Next week US and Chinese representatives will meet in another round of trade talks. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, JC Penney Co Inc (USD) 7.625% 3/1/2097 made analysts’ ‘Conviction Buy’ list. (See the chart below for JC Penney Co Inc bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   L Brands Inc. 6.875% 11/1/2035 + 0.5%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 + 0.5%
–   Intelsat Jackson Hldg SA 5.5% 8/1/2023 (1) -0.9%
  Boyd Gaming Corp. 6.875% 5/15/2023 -0.0%
Intelsat Luxembourg SA   8.125% 6/1/2023
Quad Graphics Inc.   7% 5/1/2022
L Brands Inc.   6.875% 11/1/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.14% -0.10% 0.12% 3.18% 17.63% 18.91%
Mining -0.15% -0.93% -0.85% -2.20% 4.75% 2.17%
Construction 0.03% 0.07% 0.05% 2.39% 15.40% 14.90%
Manufacturing -0.05% -0.02% 0.62% 1.96% 11.96% 11.06%
Transportion, Communication, Electric/Gas -0.08% -0.23% -0.37% 0.80% 12.77% 11.88%
Wholesale -0.03% -0.10% 0.01% 0.87% 11.85% 10.49%
Retail -0.07% -0.16% -0.32% 1.98% 15.43% 13.85%
Finance, Insurance, Real-Estate -0.02% 0.05% 0.54% 1.97% 13.97% 12.87%
Services -0.01% -0.03% 0.03% 1.77% 12.26% 11.43%
Public Administration -0.18% -0.27% 1.47% 0.86% 13.79% 16.11%
Energy -0.13% -0.86% -0.94% -2.21% 5.43% 3.29%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Centene Corp. (USD) 4.625% 12/15/2029 144A (11/21/2019): 3500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

2. Centene Corp. (USD) 4.25% 12/15/2027 144A (11/21/2019): 2500MM Senior Unsecured Notes, Price at Issuance 99.16, Yielding 4.37%.

3. Vici Properties LLC (USD) 4.625% 12/1/2029 144A (11/21/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

 1. Calpine Corp.: $1.4B bonds, Expected Q4 2019

2. Diamondback Energy Inc.: High-yield notes, Expected Q4 2019

Additional Commentary

NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1175MM new corporate-bond offering by
Wolverine Ecrow The most recent data showed a money flowed out of ETF/mutual funds for the week ended 11/15/2019, with a net outflow of $240 Million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD XR14)
Weatherford International LTD (5Y Sen USD MR14)		 Road King Infrastructure LTD (5Y Sen USD MR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)

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 11/22/19
  • Net negative capital flows into high-yield ETFs & mutual funds

 

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