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North American Bond Research – October 2, 2020

Posted on October 2, 2020
HIGH YIELD BOND RESEARCH
October 2, 2020
Bond Markets

EUROPEAN MARKETS WERE UP WHILE US MARKETS WERE DOWN AS PRESIDENT TRUMP ANNOUNCES THAT HE AND HIS WIFE HAVE COVID. ONLY 660K JOBS WERE ADDED IN SEPTEMBER, ALSO BELOW CONSENSUS FORCAST.  10 Year Treasury notes were up 1.9 bps. S&P  -0.96%, Dow -0.48%, NASDAQ -2.22%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34.8 MILLION+ CASES AND 1.03 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.6 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
+   Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.2%
  Broadcom LTD 4.3% 11/15/2032 +0.2%
  Vale Overseas LTD 3.75% 7/8/2030 +1.7%
  Communications Sales & Leasing Inc. 8.25% 10/15/2023 +0.2%
  Newfield Exploration Co. 5.375% 1/1/2026 +0.1%
–   T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.1%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.5%
  BED Bath & Beyond Inc. 5.165% 8/1/2044 -0.3%
  Petrobras Global Finance BV 8.75% 5/23/2026 -0.6%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.7%
Pacific Gas & Electric Co.   4.95% 7/1/2050
Broadcom LTD   4.3% 11/15/2032
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Vale Overseas LTD   3.75% 7/8/2030
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Communications Sales & Leasing Inc.   8.25% 10/15/2023
BED Bath & Beyond Inc.   5.165% 8/1/2044
Newfield Exploration Co.   5.375% 1/1/2026
Frontier Communications Corp.   6.86% 2/1/2028
Petrobras Global Finance BV   8.75% 5/23/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.13% -0.17% -1.00% 3.74% 4.65% 7.22%
Mining -0.01% 0.02% -3.83% 4.28% -10.94% -8.32%
Construction 0.13% 0.27% 0.23% 5.41% 5.28% 7.64%
Manufacturing 0.15% 0.35% -0.57% 4.57% 2.25% 5.90%
Transportion, Communication, Electric/Gas 0.13% 0.19% -1.02% 3.04% 3.00% 5.02%
Wholesale 0.07% 0.09% -0.59% 2.57% 1.22% 3.77%
Retail 0.10% 0.25% -0.10% 6.58% 1.44% 4.14%
Finance, Insurance, Real-Estate 0.14% 0.30% -0.51% 4.94% 1.59% 4.02%
Services 0.17% 0.39% -0.69% 5.22% 4.03% 5.10%
Public Administration -0.07% -0.15% 0.36% 5.27% 6.68% 9.60%
Energy 0.03% -0.06% -4.10% 3.92% -9.92% -7.15%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Cedar Fair LP (USD) 6.5% 10/1/2028 144A (10/01/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

2. Cedar Fair LP (USD) 6.5% 10/1/2028 Reg S (10/01/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

3. Frontier Communications Corp. (USD) 5.875% 10/15/2027 Reg S (10/01/2020): 1150MM First Lien Notes, Price at Issuance 100, Yielding 5.88%.

4. Central Garden & Pet Co. (USD) 4.125% 10/15/2030 (10/01/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

5. Frontier Communications Corp. (USD) 5.875% 10/15/2027 144A (10/01/2020): 1150MM First Lien Notes, Price at Issuance 100, Yielding 5.88%.

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

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

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

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

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

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

7. Wheelabrator Technologies Inc.: $1.3965B TLB

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

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

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

Additional Commentary

NEW ISSUANCE WATCH:   Cedar Fair LP issued 300MM of Notes.
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
BBB Industries LLC (USD) TL2 L+825 08/01/2026
Tritech Software Systems (USD) TL2 L+750 08/31/2026
Mattress Firm (USD) TL EXIT 11/21/2022
Royal Caribbean Cruises LTD (USD) RC L+130 04/05/2024
JC Penney Co. Inc. (USD) DD L+1175 11/15/2020
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
TCW Group (USD) TLB L+175 12/27/2024
EG Group (USD) TLB L+400 02/06/2025
Tacala LLC (USD) TLB L+350 02/05/2027

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 15 bps (basis points), as of 10/02/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

INVESTMENT GRADE BOND RESEARCH
October 2, 2020
Bond Markets

EUROPEAN MARKETS WERE UP WHILE US MARKETS WERE DOWN AS PRESIDENT TRUMP ANNOUNCES THAT HE AND HIS WIFE HAVE COVID. ONLY 660K JOBS WERE ADDED IN SEPTEMBER, ALSO BELOW CONSENSUS FORCAST.  10 Year Treasury notes were up 1.9 bps. S&P -0.96%, Dow -0.48%, NASDAQ -2.22%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34.8 MILLION+ CASES AND 1.03 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.6 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
+   Mondelez Intl Inc. 2.625% 9/4/2050 +1.2%
  Caterpillar Financial Services Corp. 2.65% 5/17/2021 +0.1%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.2%
  Host Hotels & Resorts LP 3.375% 12/15/2029 +1.9%
  Broadcom LTD 4.3% 11/15/2032 +0.2%
–   Boeing Co. 5.805% 5/1/2050 -0.4%
  Citizens Bank NA 2.25% 10/30/2020 -0.1%
  Apple Inc. 2.25% 2/23/2021 -0.0%
  Exxon Mobil Corp. 2.22% 3/1/2021 -0.4%
  AT&T Inc. 2.3% 6/1/2027 -0.1%
Boeing Co.   5.805% 5/1/2050
Mondelez Intl Inc.   2.625% 9/4/2050
Suzano Austria GmbH   3.75% 1/15/2031
Caterpillar Financial Services Corp.   2.65% 5/17/2021
Pacific Gas & Electric Co.   4.95% 7/1/2050
Host Hotels & Resorts LP   3.375% 12/15/2029
Broadcom LTD   4.3% 11/15/2032
Citizens Bank NA   2.25% 10/30/2020
Hasbro Inc.   3.55% 11/19/2026
Goldman Sachs Group Inc.   VAR% 4/23/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.04% -0.38% -0.83% 2.69% 5.00% 5.77%
Construction -0.11% -0.31% 0.97% 3.45% 5.70% 6.37%
Manufacturing 0.01% -0.13% -0.07% 1.85% 7.10% 7.93%
Transportion, Communication, Electric/Gas -0.05% -0.47% -0.36% 1.81% 8.09% 8.74%
Wholesale 0.06% -0.21% 0.09% 2.55% 6.89% 8.71%
Retail -0.02% -0.15% -0.02% 1.32% 7.76% 8.72%
Finance, Insurance, Real-Estate 0.02% -0.08% -0.09% 1.57% 6.08% 7.08%
Services -0.02% -0.16% -0.02% 1.81% 6.61% 7.16%
Public Administration 0.01% 0.02% 0.30% 0.38% 5.15% 4.82%
Energy -0.02% -0.50% -1.14% 1.96% 3.83% 5.03%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Union Electric Co. (USD) 2.625% 3/15/2051 (10/01/2020): 550MM First Lien Notes, Price at Issuance 99.522, Yielding 2.65%.

2. New England Power Co. (USD) 2.807% 10/6/2050 144A (10/01/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.81%.

3. First Mid Bancshares Inc. (USD) VAR% 10/15/2030 (10/01/2020): 96MM Subordinated Notes, Price at Issuance 100.

4. New England Power Co. (USD) 2.807% 10/6/2050 Reg S (10/01/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.81%.

5. Stantec Inc. (CAD) 2.048% 10/8/2027 (10/01/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.05%.

6. Peacehealth Obligated Group (USD) 3.218% 11/15/2050 (10/01/2020): 403MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.22%.

7. Signature Bank New York (USD) VAR% 10/15/2030 (10/01/2020): 375MM Subordinated Notes, Price at Issuance 100.

8. Peacehealth Obligated Group (USD) 1.375% 11/15/2025 (10/01/2020): 338MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.38%.

Additional Commentary

NEW ISSUANCE WATCH:  Union Electric Co.  issued 550MM in notes.
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
BBB Industries LLC (USD) TL2 L+825 08/01/2026
Tritech Software Systems (USD) TL2 L+750 08/31/2026
Mattress Firm (USD) TL EXIT 11/21/2022
Royal Caribbean Cruises LTD (USD) RC L+130 04/05/2024
JC Penney Co. Inc. (USD) DD L+1175 11/15/2020
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
TCW Group (USD) TLB L+175 12/27/2024
EG Group (USD) TLB L+400 02/06/2025
Tacala LLC (USD) TLB L+350 02/05/2027

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 15 bps (basis points), as of 10/02/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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