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North American Bond Research – November 27, 2019

Posted on November 27, 2019
HIGH YIELD BOND RESEARCH
November 27, 2019

Bond Markets


STOCKS CONTINUE RALLY, REACH NEW HIGHS. Investors Hope that a phase 1 trade deal will happen. M&A activity also supports stock rallies. Fed states the economy grew modestly but gave a positive outlook. The 10-year note gained 2.7 basis points. S&P +0.42%, Dow +0.15%, NASDAQ +0.66%.
DEUTSCHE BANK IS SELLING UNWANTED ASSETS IN ASIA AND EUROPE AND OTHER BANKS ARE EAGER TO BUY THESE ASSETS. Barclays and Morgan Stanley were big buyers in Asia whereas Goldman is the primary buyer of the $50 billion assets being sold in Europe. 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
+   GE Capital Intl. Funding Co. 2.342% 11/15/2020 + 0.1%
  Credit Agricole CIB SA FLT% 10/3/2021 + 0.0%
  Ford Motor Credit Co. 5.113% 5/3/2029 + 0.2%
–   Mylan Inc. 3.95% 6/15/2026 -0.5%
  AT&T Inc. 4.35% 3/1/2029 -0.3%
Bank of America Corp.   3.875% 8/1/2025
Concho Resources Inc.   4.3% 8/15/2028
Enterprise Products Operating LLC   3.75% 2/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% 0.19% 0.35% 2.98% 18.87% 20.52%
Mining 0.03% -0.32% -0.54% -1.54% 5.78% 3.59%
Construction 0.09% 0.38% -0.17% 2.02% 14.35% 13.67%
Manufacturing 0.12% 0.36% 0.78% 2.18% 12.05% 11.08%
Transportion, Communication, Electric/Gas 0.15% 0.46% -0.08% 1.20% 13.66% 12.69%
Wholesale 0.13% 0.17% -0.28% 0.73% 11.22% 9.91%
Retail 0.11% -0.04% -0.75% 1.61% 14.89% 13.08%
Finance, Insurance, Real-Estate 0.10% 0.31% 0.42% 2.09% 13.82% 12.84%
Services 0.09% 0.21% 0.03% 1.81% 12.47% 11.61%
Public Administration 0.32% 0.72% 0.59% 1.86% 14.57% 17.19%
Energy 0.07% -0.19% -0.37% -1.49% 6.33% 4.48%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 11/27/2019)
1. LIONSGATE: $3.6 billion bond and bank financing. Expected 3rd Quarter 2016.

2. FERRO CORP: $200 million offering senior notes due 2016, expected week of July 21, 2008.

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 CR14)
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 33 bp (basis points), as of 11/27/19
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 27, 2019

Bond Markets


CHINA’S CHIEF NEGOTIATOR VOICED CAUTIOUS OPTIMISM THAT A DEAL COULD GET DONE. Markets were up slightly today. Talks will likely extend into 2020 as both sides hammer out the hardest issues. Fresh M&A activity also pushed stocks up as well. The 10-year note gained .2 basis points. S&P+0.75%, DOW +0.68%, NASDAQ +1.32%.
DEUTSCHE BANK IS SELLING UNWANTED ASSETS IN ASIA AND EUROPE AND OTHER BANKS ARE EAGER TO BUY THESE ASSETS. Barclays and Morgan Stanley were big buyers in Asia whereas Goldman is the primary buyer of the $50 billion assets being sold in Europe. 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. 2.342% 11/15/2020 + 0.1%
  Entergy Arkansas Inc. 3.75% 2/15/2021 + 0.1%
  Credit Agricole CIB SA FLT% 10/3/2021 + 0.0%
–   Bank of America Corp. 3.875% 8/1/2025 -0.2%
  Mylan Inc. 3.95% 6/15/2026 -0.5%
  AT&T Inc. 4.35% 3/1/2029 -0.3%
Bank of America Corp.   3.875% 8/1/2025
Concho Resources Inc.   4.3% 8/15/2028
Macy’s Retail Hldg Inc.   4.3% 2/15/2043
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.14% 0.16% 0.67% 1.42% 6.25% 6.41%
Mining 0.27% 0.44% 0.67% 0.19% 12.66% 14.38%
Construction 0.16% 0.44% 0.84% 0.55% 10.20% 11.39%
Manufacturing 0.17% 0.44% 0.86% 0.56% 11.46% 12.63%
Transportion, Communication, Electric/Gas 0.26% 0.64% 0.99% 0.29% 14.85% 16.99%
Wholesale 0.17% 0.39% 0.91% 1.22% 13.18% 13.90%
Retail 0.17% 0.44% 0.63% 0.33% 12.38% 13.73%
Finance, Insurance, Real-Estate 0.12% 0.27% 0.66% 0.62% 9.94% 11.21%
Services 0.17% 0.37% 0.59% 0.36% 11.24% 12.74%
Public Administration 0.08% 0.10% 0.21% -0.03% 4.63% 6.10%
Energy 0.24% 0.46% 0.66% 0.10% 12.97% 14.69%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Liberty University Inc. (USD) 3.338% 3/1/2034 (11/26/2019): 86MM Senior Unsecured Notes, Price at Issuance 100.

2. Air Lease Corp. (CAD) 2.625% 12/5/2024 (11/26/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.083, Yielding 2.82%.

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 33 bp (basis points), as of 11/27/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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