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North American Bond Research – October 19, 2020

Posted on October 19, 2020
HIGH YIELD BOND RESEARCH
October 19, 2020
Bond Markets

GLOBAL MARKETS WERE DOWN AS STIMULUS TALKS FALTER. PELOSI AND MNUCHIN ARE GETTING CLOSER, BUT SENATE REPUBLICANS ARE BAULKING AT THE SIZE OF THE RESCUE. 10 Year Treasury notes were up 1.7 bps. S&P -1.63%, Dow -1.44%, NASDAQ -1.65%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 40.5 MILLION+ CASES AND 1.12 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.4 MILLION+ CASES AND 225000+ 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
+   Pacific Gas & Electric Co. 4.75% 2/15/2044 +0.0%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.4%
  Ford Motor Co. 9.625% 4/22/2030 +0.3%
  Diamondback Energy Inc. 3.5% 12/1/2029 +0.8%
  Western Digital Corp. 4.75% 2/15/2026 +1.1%
–   Vale Overseas LTD 6.25% 8/10/2026 -0.3%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.7%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.3%
  Ally Financial Inc. 4.625% 5/19/2022 -0.2%
  Sprint Capital Corp. 6.875% 11/15/2028 -0.2%
Vale Overseas LTD   6.25% 8/10/2026
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Pacific Gas & Electric Co.   4.75% 2/15/2044
Pacific Gas & Electric Co.   4.95% 7/1/2050
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Ally Financial Inc.   4.625% 5/19/2022
Sprint Capital Corp.   6.875% 11/15/2028
Ford Motor Co.   9.625% 4/22/2030
Broadcom LTD   4.3% 11/15/2032
Diamondback Energy Inc.   3.5% 12/1/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.02% -0.00% 0.29% 2.90% 5.62% 7.56%
Mining -0.07% -0.32% 121.26% 76.39% -9.57% -5.76%
Construction -0.01% 0.15% 1.26% 6.06% 6.41% 7.81%
Manufacturing 0.00% 0.15% 0.65% 4.10% 3.38% 7.02%
Transportion, Communication, Electric/Gas 0.02% 0.12% 0.12% 2.62% 3.89% 5.71%
Wholesale 0.07% -0.00% 0.41% 2.60% 2.21% 4.65%
Retail -0.01% 0.07% 0.56% 6.31% 2.84% 4.93%
Finance, Insurance, Real-Estate -0.00% 0.22% 0.47% 4.68% 2.16% 4.71%
Services 0.03% 0.13% -0.11% 4.76% 3.09% 5.15%
Public Administration -0.71% -0.24% -0.36% 5.79% 7.69% 10.09%
Energy -0.02% 0.16% 106.38% 67.31% -8.23% -4.37%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 10/19/2020)
1. Weber-Stephen Products LLC: $1.5B credit facilities: $300MM revolver; $1.2MM TLB

2. Virtusa Corp.: $725MM credit facilities: $125MM revolver; $600MM TL

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

4. Quirch Foods LLC: $675MM credit facilities: $475MM TLB; $200MM revolver

5. E2 Open: $600MM credit facilities: $75MM revolver; $525MM TLB

6. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

7. Covis Group SARL: $485MM credit facilities: $460MM TL; $25MM revolver

8. Cincinnati Bell Inc.: $1.6B credit facilities: $250MM revolver; $1.35B TL

9. Adevinta: $500MM TLB (BB-/BB+)

10. Virtusa Corp.: $725MM credit facilities: $125MM revolver; $600MM TL

Additional Commentary

NEW ISSUANCE WATCH:   New Home Co Inc issued 250MM
Top Widening Loans Top Narrowing Loans
Alliance Healthcare Services Inc. (USD) TL L+450 10/24/2023
CSM Bakery (USD) TL L+1000 02/04/2022
API Technologies Corp. (USD) TL L+425 05/09/2026
Wittur (EUR) TL E+850 09/19/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
CPV Shore LLC (USD) TLB L+375 12/27/2025
Cvent Inc. (USD) TL L+375 11/02/2024
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
Mitel Networks Corp. (USD) TL L+450 11/30/2025

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 13 bps (basis points), as of 10/19/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 19, 2020
Bond Markets

GLOBAL MARKETS WERE DOWN AS STIMULUS TALKS FALTER. PELOSI AND MNUCHIN ARE GETTING CLOSER, BUT SENATE REPUBLICANS ARE BAULKING AT THE SIZE OF THE RESCUE. 10 Year Treasury notes were up 1.7 bps. S&P -1.63%, Dow -1.44%, NASDAQ -1.65%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 40.5 MILLION+ CASES AND 1.12 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.4 MILLION+ CASES AND 225000+ 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
+   Sanofi-Aventis 4% 3/29/2021 +0.2%
  Bank of America Corp. 4.083% 3/20/2051 +0.3%
  Suzano Austria GmbH 3.75% 1/15/2031 +0.5%
  General Electric Co. 4.35% 5/1/2050 +0.5%
  General Motors Co. 5.4% 4/1/2048 +1.2%
–   Lowe’s Companies Inc. 1.7% 10/15/2030 -0.4%
  Lowe’s Companies Inc. 3% 10/15/2050 -0.8%
  SYSCO Corp. 6.6% 4/1/2050 -0.5%
  PNC Bank NA 2.625% 2/17/2022 -0.0%
  General Motors Co. 5.95% 4/1/2049 -0.6%
Sanofi-Aventis   4% 3/29/2021
Lowe’s Companies Inc.   1.7% 10/15/2030
Bank of America Corp.   4.083% 3/20/2051
Suzano Austria GmbH   3.75% 1/15/2031
Lowe’s Companies Inc.   3% 10/15/2050
SYSCO Corp.   6.6% 4/1/2050
PNC Bank NA   2.625% 2/17/2022
General Motors Co.   5.95% 4/1/2049
General Electric Co.   4.35% 5/1/2050
General Motors Co.   5.4% 4/1/2048
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.02% 0.58% -0.24% 1.66% 5.65% 6.95%
Construction 0.04% 0.41% 0.86% 2.61% 5.81% 6.97%
Manufacturing -0.00% 0.34% -0.00% 0.89% 7.67% 8.78%
Transportion, Communication, Electric/Gas 0.01% 0.55% -0.20% 0.39% 8.56% 9.80%
Wholesale 0.06% 0.43% 0.35% 2.06% 7.79% 9.96%
Retail 0.01% 0.40% 0.08% 0.16% 8.72% 10.48%
Finance, Insurance, Real-Estate 0.01% 0.24% 0.05% 1.08% 6.53% 7.77%
Services 0.00% 0.27% -0.07% 0.80% 7.34% 8.22%
Public Administration -0.02% 0.07% 0.02% 0.48% 5.12% 5.19%
Energy 0.01% 0.60% -0.48% 1.10% 4.42% 6.18%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 10/19/2020)
Additional Commentary

NEW ISSUANCE WATCH:  W.K. Kellogg Foundation Trust issued 300MM in notes.
Top Widening Loans Top Narrowing Loans
Alliance Healthcare Services Inc. (USD) TL L+450 10/24/2023
CSM Bakery (USD) TL L+1000 02/04/2022
API Technologies Corp. (USD) TL L+425 05/09/2026
Wittur (EUR) TL E+850 09/19/2027
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
CPV Shore LLC (USD) TLB L+375 12/27/2025
Cvent Inc. (USD) TL L+375 11/02/2024
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
Mitel Networks Corp. (USD) TL L+450 11/30/2025

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 13 bps (basis points), as of 10/19/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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