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North American Bond Research – November 25, 2019

Posted on November 25, 2019
HIGH YIELD BOND RESEARCH
November 25, 2019

Bond Markets


CHINA SHOWED A WILLINGNESS TO CRACKDOWN ON INTELLECTUAL PROPERTY RIGHTS VIOLATIONS. China issued new guidance on penalties in the event IP violations occur. The market took that development to mean that representatives are making headway in the trade war.  FTSE 100. The 10-year note gained 0.2 basis points. S&P +0.75%, DOW +0.68%, NASDAQ +1.32%.
MOST OF THE MAJOR SOVEREIGN BOND CURVES STEEPEN TODAY. Shorter duration bond yields were down slightly while longer duration bonds yields went up. 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, 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
+   United States STL Corp. New 6.25% 3/15/2026 + 0.7%
  Klabin SA 4.875% 9/19/2027 Reg S + 0.3%
  KFC Hldg 4.75% 6/1/2027 Reg S + 0.1%
–   Dish DBS Corp. 5.875% 11/15/2024 -0.7%
  Unit Corp. 6.625% 5/15/2021 -2.9%
  Tesla Motors Inc. 5.3% 8/15/2025 Reg S -0.4%
Petrobras Global Finance BV   8.75% 5/23/2026
Verisign Inc.   4.75% 7/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.03% 0.21% 0.22% 3.11% 18.77% 20.18%
Mining -0.01% -0.98% -0.92% -2.48% 4.91% 2.39%
Construction 0.00% 0.09% -0.30% 2.04% 14.87% 14.32%
Manufacturing 0.05% 0.04% 0.59% 2.05% 11.99% 11.10%
Transportion, Communication, Electric/Gas 0.09% -0.32% -0.72% 0.54% 13.49% 12.69%
Wholesale 0.05% -0.00% -0.01% 1.14% 11.99% 10.86%
Retail 0.03% -0.59% -0.93% 1.01% 14.86% 13.13%
Finance, Insurance, Real-Estate 0.04% 0.05% 0.44% 1.83% 13.67% 12.54%
Services 0.03% 0.04% 0.19% 1.89% 12.51% 11.72%
Public Administration 0.12% 0.02% -0.00% 1.16% 13.92% 16.23%
Energy -0.01% -0.88% -0.82% -2.39% 5.28% 3.11%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 11/25/2019)
1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. DDM Holding AG: ¬100MM, 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 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 34 bp (basis points), as of 11/25/19
  • Net negative capital flows into high-yield ETFs & mutual funds

INVESTMENT GRADE BOND RESEARCH
November 25, 2019

Bond Markets


CHINA SHOWED A WILLINGNESS TO CRACKDOWN ON INTELLECTUAL PROPERTY RIGHTS VIOLATIONS. China issued new guidance on penalties in the event IP violations occur. The market took that development to mean that representatives are making headway in the trade war.  FTSE 100. The 10-year note gained 0.2 basis points. S&P +0.75%, DOW +0.68%, NASDAQ +1.32%.
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 bondsHigh-yield edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,  Viacom Inc. (USD) 2.25% 2/4/2022  made analysts’ ‘Conviction Buy’ list. (See the chart below for Viacom Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   GE Capital Intl. Funding Co. 4.418% 11/15/2035 + 0.7%
  Abbvie Inc. 4.05% 11/21/2039 144A + 0.9%
  Target Corp. 3.625% 4/25/2046 + 0.4%
–   GE Capital Intl. Funding Co. 2.342% 11/15/2020 -0.1%
  AT&T Inc. FLT% 6/12/2024 -0.2%
  Newell Rubbermaid Inc. 4.2% 4/1/2026 -0.2%
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Abbvie Inc.   4.05% 11/21/2039 144A
GE Capital Intl. Funding Co.   2.342% 11/15/2020
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.04% 0.12% 0.45% 1.32% 5.96% 6.39%
Mining 0.01% 0.27% 0.12% -0.07% 12.02% 13.70%
Construction -0.03% 0.48% 0.48% 0.59% 10.06% 11.16%
Manufacturing 0.01% 0.32% 0.48% 0.59% 11.15% 12.35%
Transportion, Communication, Electric/Gas 0.03% 0.50% 0.52% 0.26% 14.34% 16.47%
Wholesale -0.01% 0.30% 0.61% 1.28% 13.43% 13.94%
Retail 0.05% 0.34% 0.27% 0.41% 12.82% 14.00%
Finance, Insurance, Real-Estate -0.00% 0.23% 0.41% 0.69% 9.76% 11.12%
Services 0.00% 0.28% 0.24% 0.37% 11.09% 12.62%
Public Administration -0.04% 0.11% 0.09% 0.12% 4.62% 6.12%
Energy 0.03% 0.29% 0.20% -0.05% 12.36% 14.07%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Macquarie Bank LTD (USD) FLT% 11/24/2021 144A (11/25/2019): 200MM Senior Unsecured Notes, Price at Issuance 100.

2. DNB Bank ASA (USD) FLT% 12/2/2022 144A (11/25/2019): 600MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary


NEW ISSUANCE WATCH: on 11/14/19 participants welcome a $1000MM new corporate-bond offering by
Nationwide Financial Service. 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 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 34 bp (basis points), as of 11/25/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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