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North American Bond Research – November 5, 2019

Posted on November 5, 2019
HIGH YIELD BOND RESEARCH
November 5, 2019
Bond Markets
THE NUMBER OF UNFILLED JOBS DECLINED IN SEPTEMBER to an 18 month low despite the unemployment rate maintaining a 50 year low in September.  “The labor market remains strong, but is clearly slowing down.” The 10-year note rose 8.8 basis points. S&P +0.01%, DOW +0.30, NASDAQ +0.17%

TREASURY YIELDS MOVE HIGHER ON HOPES of a trade deal between the U.S. and China. “We’re in good shape, we’re making good progress, and there’s no natural reason why it couldn’t be” signed by the end of the year. The two countries reportedly are considering rolling back tariffs under the trade deal. The service sector grew in October as the non-manufacturing index rose to 54.7 insulating the economy as manufacturing slows. 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, Pacific Gas & Electric Co. (USD) 3.85% 11/15/2023 made analysts’ ‘Conviction Buy’ list. (See the chart below for Pacific Gas & Electric Co bonds) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 1.2%
  Ally Financial Inc. 4.25% 4/15/2021 + 0.0%
  Pacific Gas & Electric Co. 4% 12/1/2046 + 1.3%
–   Chesapeake Energy Corp. 7% 10/1/2024 -12.3%
Pacific Gas & Electric Co.   3.95% 12/1/2047
Chemours Co. LLC   7% 5/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.12% -0.29% 0.81% 3.52% 17.39% 17.22%
Mining 0.44% 0.07% 0.25% -2.06% 6.45% 1.88%
Construction 0.12% -0.27% 1.03% 3.19% 14.82% 13.37%
Manufacturing 0.14% 0.18% 1.35% 2.28% 11.72% 9.81%
Transportion, Communication, Electric/Gas 0.07% 0.05% 0.76% 2.01% 13.14% 10.85%
Wholesale 0.04% -0.18% 0.72% 1.08% 11.96% 9.03%
Retail 0.11% -0.06% 1.29% 2.95% 15.61% 12.79%
Finance, Insurance, Real-Estate 0.05% 0.07% 0.90% 2.14% 13.42% 11.04%
Services 0.06% -0.01% 1.05% 2.08% 12.07% 10.29%
Public Administration -0.08% -0.14% 0.67% 1.53% 13.68% 15.05%
Energy 0.36% 0.13% -0.15% -1.64% 6.85% 2.72%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Silgan Holdings Inc. (USD) 4.125% 2/1/2028 Reg S (11/04/2019): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

2. CHS/Community Health Systems Inc. (USD) 8% 3/15/2026 (11/04/2019): 500MM First Lien Notes, Price at Issuance 100, Yielding 8%.

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

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

3. Alpha Auto Group: $225MM notes, Expected 4th Quarter 2019
Additional Commentary
NEW ISSUANCE WATCH: on 11/05/19 participants welcome a $500MM new corporate-bond offering by
MSCI 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)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)		 Cable & Wireless Communication (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 38 bp (basis points), as of 11/05/19
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

 

 

INVESTMENT GRADE BOND RESEARCH
November 5, 2019
Bond Markets
THE NUMBER OF UNFILLED JOBS DECLINED IN SEPTEMBER to an 18 month low despite the unemployment rate maintaining a 50 year low in September.  “The labor market remains strong, but is clearly slowing down.” The 10-year note rose 8.8 basis points. S&P +0.01%, DOW +0.30, NASDAQ +0.17%

TREASURY YIELDS MOVE HIGHER ON HOPES of a trade deal between the U.S. and China. “We’re in good shape, we’re making good progress, and there’s no natural reason why it couldn’t be” signed by the end of the year. The two countries reportedly are considering rolling back tariffs under the trade deal. The service sector grew in October as the non-manufacturing index rose to 54.7 insulating the economy as manufacturing slows. 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, Pacific Gas & Electric Co. (USD) 3.85% 11/15/2023 made analysts’ ‘Conviction Buy’ list. (See the chart for ADI Indices above) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   JPMorgan Chase & Co. 2.295% 8/15/2021 + 0.4%
  Deutsche Bank Securities Inc. (USD) 2.7% 7/13/2020 + 0.1%
–   AT&T Inc. 4.35% 3/1/2029 -1.1%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 -0.6%
Southern Copper Corp.   5.875% 4/23/2045
BB&T Corp.   3.05% 6/20/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.06% 0.19% -0.05% 0.76% 5.74% 6.57%
Mining -0.23% 0.32% -0.84% 1.48% 11.86% 12.89%
Construction -0.30% 0.37% -0.75% 1.33% 10.64% 12.22%
Manufacturing -0.24% 0.41% -0.45% 2.09% 11.28% 12.58%
Transportion, Communication, Electric/Gas -0.35% 0.52% -0.78% 2.20% 14.06% 16.29%
Wholesale -0.23% 0.51% -0.09% 2.37% 13.11% 13.50%
Retail -0.32% 0.32% -0.55% 2.31% 12.38% 14.06%
Finance, Insurance, Real-Estate -0.14% 0.34% -0.21% 1.66% 9.46% 10.87%
Services -0.24% 0.26% -0.61% 2.14% 10.93% 12.87%
Public Administration -0.09% 0.19% -0.50% 0.92% 4.48% 6.46%
Energy -0.27% 0.34% -0.82% 1.50% 12.35% 13.37%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Nordstrom Inc. (USD) 4.375% 4/1/2030 (11/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.888, Yielding 4.39%.

2. Commonwealth Edison (ComEd) (USD) 3.2% 11/15/2049 (11/04/2019): 300MM Secured Notes, Price at Issuance 99.217, Yielding 3.24%.
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)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)		 Cable & Wireless Communication (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 38 bp (basis points), as of 11/05/19
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

 

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