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North American Bond Research – October 1, 2020

Posted on October 1, 2020
HIGH YIELD BOND RESEARCH
October 1, 2020
Bond Markets

GLOBAL MARKETS WERE MOSTLY UP AS FEWER PEOPLE FILED FOR UNEMPLOYMENT(836K), THERE IS PROGRESS ON MORE STIMULUS, AND  ADVANCEMENTS ARE BEING MADE TOWARDS A VACCINE. 10 Year Treasury notes were up 0 bps. S&P +0.53%, Dow +0.13%, NASDAQ +1.42%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34.5 MILLION+ CASES AND 1.022 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.5 MILLION+ CASES AND 213000+ DEATHS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028 made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   BED Bath & Beyond Inc. 5.165% 8/1/2044 +7.6%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.4%
  Centene Corp. 3% 10/15/2030 +0.3%
  Pacific Gas & Electric Co. 4.3% 3/15/2045 +0.3%
  WPX Energy Inc. 4.5% 1/15/2030 +0.1%
–   Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.1%
  Aircastle LTD 4.125% 5/1/2024 -0.2%
  Occidental Petroleum Corp. 2.9% 8/15/2024 -0.3%
  Petrobras Global Finance BV 6.85% 6/5/2115 -0.2%
  Sprint Spectrum LP 7.25% 9/15/2021 -0.1%
Pacific Gas & Electric Co.   4.95% 7/1/2050
BED Bath & Beyond Inc.   5.165% 8/1/2044
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Aircastle LTD   4.125% 5/1/2024
Occidental Petroleum Corp.   2.9% 8/15/2024
Petrobras Global Finance BV   6.85% 6/5/2115
Centene Corp.   3% 10/15/2030
Pacific Gas & Electric Co.   4.3% 3/15/2045
WPX Energy Inc.   4.5% 1/15/2030
Pacific Gas & Electric Co.   4.55% 7/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.01% -0.27% -0.69% 3.60% 4.69% 6.73%
Mining 0.18% -0.90% -3.58% 4.17% -11.89% -9.39%
Construction 0.12% -0.02% 0.34% 5.18% 4.91% 7.18%
Manufacturing 0.14% -0.09% -0.42% 4.74% 1.85% 5.69%
Transportion, Communication, Electric/Gas 0.10% -0.33% -0.82% 2.87% 2.97% 4.95%
Wholesale 0.07% -0.23% -0.57% 2.32% 0.70% 3.51%
Retail 0.13% -0.13% 0.04% 6.81% 1.56% 4.29%
Finance, Insurance, Real-Estate 0.16% -0.11% -0.31% 4.69% 1.32% 3.79%
Services 0.18% -0.10% -0.44% 5.06% 4.43% 5.24%
Public Administration 0.02% -0.24% 0.46% 5.57% 6.76% 9.81%
Energy 0.14% -1.04% -4.06% 3.63% -10.92% -8.18%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. OCI NV (USD) 4.625% 10/15/2025 144A (09/30/2020): 400MM Secured Notes, Price at Issuance 100, Yielding 4.63%.

2. Allegiant Travel Co. (USD) 8.5% 2/5/2024 Reg S (09/30/2020): 150MM First Lien Notes, Price at Issuance 100, Yielding 8.5%.

3. Encompass Health Corp. (USD) 4.625% 4/1/2031 (09/30/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

4. Lithia Motors Inc. (USD) 4.375% 1/15/2031 144A (09/30/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

5. Lithia Motors Inc. (USD) 4.375% 1/15/2031 Reg S (09/30/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

1. Alera Group: $300MM TLB (B2)

2. American Residential Services: $470MM TLB (B1/B)

3. Array Residential Services: $575MM TLB (B1/B+)

4. Wheelabrator Technologies Inc.: $1.3965B TLB

5. Pae Holding Corp.: $890MM TLB (B2/B)

6. Vander-Bend Manufacturing Inc.: $197.5MM credit facilities: $20MM revolver; $177.5MM TLB

7. Global Medical Response: $1.5B TL (B1/B)

8. Array Residential Services: $575MM TLB (B1/B+)

9. American Residential Services: $470MM TLB (B1/B)

10. Global Medical Response: $1.5B TL (B1/B)

Additional Commentary

NEW ISSUANCE WATCH:   OCI NV  issued 400MM of Notes.
Top Widening Loans Top Narrowing Loans
Nets Hldgs AS (NOK) TLB1N L+400 02/06/2025
SSH Group Hldg Inc. (USD) TL2 L+825 07/30/2026
Pro Mach Group Inc. (USD) DD L+350 03/07/2025
Excelitas Technologies Corp. (EUR) TL E+350 12/04/2024
Arvos Holding (EUR) TLB2 E+450 08/29/2021
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Deoleo SA (EUR) TL 06/24/2026
Ameriforge Group Inc. (USD) L+800 06/01/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Tecomet Inc. (USD) TL L+350 05/01/2024

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 14 bp (basis points), as of 10/01/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 1, 2020
Bond Markets

GLOBAL MARKETS WERE MOSTLY UP AS FEWER PEOPLE FILED FOR UNEMPLOYMENT(836K), THERE IS PROGRESS ON MORE STIMULUS, AND  ADVANCEMENTS ARE BEING MADE TOWARDS A VACCINE. 10 Year Treasury notes were up 0 bps. S&P +0.53%, Dow +0.13%, NASDAQ +1.42%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34.5 MILLION+ CASES AND 1.022 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.5 MILLION+ CASES AND 213000+ DEATHS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Halliburton Co. (USD) 5% 11/15/2045 made analysts’ ‘Conviction Buy’ list. (See the chart below for Halliburton Co.  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Gilead Sciences Inc. 2.8% 10/1/2050 +0.3%
  Gilead Sciences Inc. 2.6% 10/1/2040 +0.1%
  Mondelez Intl Inc. 2.625% 9/4/2050 +1.0%
  Simon Property Group Inc. 2.65% 7/15/2030 +0.3%
  B.A.T. Capital Corp. 2.726% 3/25/2031 +0.5%
–   Suzano Austria GmbH 3.75% 1/15/2031 -1.2%
  Credit Suisse Group AG VAR% 4/1/2031 Reg S -0.1%
  AerCap Ireland Capital LTD 4.625% 10/15/2027 -0.6%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.1%
  CVS Health Corp. 4.3% 3/25/2028 -0.1%
Gilead Sciences Inc.   2.8% 10/1/2050
Gilead Sciences Inc.   2.6% 10/1/2040
Mondelez Intl Inc.   2.625% 9/4/2050
Simon Property Group Inc.   2.65% 7/15/2030
B.A.T. Capital Corp.   2.726% 3/25/2031
Suzano Austria GmbH   3.75% 1/15/2031
Credit Suisse Group AG   VAR% 4/1/2031 Reg S
B.A.T. Capital Corp.   3.984% 9/25/2050
Boeing Co.   5.15% 5/1/2030
Enterprise Products Operating LLC   3.2% 2/15/2052
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.02% -0.60% -0.45% 2.79% 5.07% 5.97%
Construction 0.05% -0.14% 1.35% 3.51% 5.83% 6.72%
Manufacturing -0.06% -0.31% 0.28% 1.86% 7.19% 8.18%
Transportion, Communication, Electric/Gas -0.10% -0.56% 0.15% 1.93% 8.23% 9.09%
Wholesale -0.05% -0.34% 0.35% 2.43% 6.80% 8.94%
Retail -0.06% -0.29% 0.35% 1.19% 7.93% 9.33%
Finance, Insurance, Real-Estate -0.02% -0.19% 0.13% 1.53% 6.04% 7.24%
Services -0.04% -0.26% 0.33% 1.89% 6.53% 7.37%
Public Administration -0.04% 0.02% 0.23% 0.39% 5.16% 4.91%
Energy -0.05% -0.76% -0.74% 1.96% 3.90% 5.22%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Orlando Health Obligated Grp. (USD) 3.477% 10/1/2042 (09/30/2020): 128MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.48%.

2. Orlando Health Obligated Grp. (USD) 3.327% 10/1/2050 (09/30/2020): 317MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.33%.

3. Veritext Holding Co. (USD) VAR% 10/15/2030 (09/30/2020): 125MM Subordinated Notes, Price at Issuance 100.

4. Mondelez International Inc. (USD) 1.875% 10/15/2032 (09/30/2020): 625MM Senior Unsecured Notes, Price at Issuance 99.765, Yielding 1.9%.

5. Jefferies Group Inc. (USD) 2.75% 10/15/2032 (09/30/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.968, Yielding 2.85%.

6. Toronto Hydro Corp. (CAD) 1.5% 10/15/2030 (09/30/2020): 200MM Senior Unsecured Notes, Price at Issuance 99.843, Yielding 1.52%.

Additional Commentary

NEW ISSUANCE WATCH:  Orlando Health Obligated Grp. issued 128MM in notes.
Top Widening Loans Top Narrowing Loans
Nets Hldgs AS (NOK) TLB1N L+400 02/06/2025
SSH Group Hldg Inc. (USD) TL2 L+825 07/30/2026
Pro Mach Group Inc. (USD) DD L+350 03/07/2025
Excelitas Technologies Corp. (EUR) TL E+350 12/04/2024
Arvos Holding (EUR) TLB2 E+450 08/29/2021
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Deoleo SA (EUR) TL 06/24/2026
Ameriforge Group Inc. (USD) L+800 06/01/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Tecomet Inc. (USD) TL L+350 05/01/2024

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 14bp (basis points), as of 10/01/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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