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North American Bond Research – October 28, 2020

Posted on October 28, 2020
HIGH YIELD BOND RESEARCH
October 28, 2020
Bond Markets

GLOBAL MARKETS LOWER AGAIN AS COVID CONTINUES TO RAVAGE THE US AND EUROPE. THE LACK OF PROGRESS ON THE STIMULUS AND THE UNCERTAINTY OF THE US ELECTION IS ADDING TO MARKET VOLATILITY. 10 Year Treasury notes were down 0.3 bps. S&P -3.43%, Dow -3.53%, NASDAQ -3.73%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 44.2 MILLION+ CASES AND 1.17 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 9.1 MILLION+ CASES AND 233000+ 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
+   CNH Industrial Capital LLC 3.875% 10/15/2021 +0.0%
  Cheniere Corpus Christi Hldgs LLC 5.125% 6/30/2027 +0.1%
  BED Bath & Beyond Inc. 5.165% 8/1/2044 +1.2%
  Antero Resources Corp. 5% 3/1/2025 +0.3%
  Ford Motor Co. 9% 4/22/2025 +1.3%
–   Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.6%
  Cenovus Energy Inc. 5.375% 7/15/2025 -1.2%
  Petrobras Global Finance BV 7.375% 1/17/2027 -1.7%
  Crown Castle Intl Corp. 5.25% 1/15/2023 -0.1%
  HCA Inc. 3.5% 9/1/2030 -0.3%
Pacific Gas & Electric Co.   4.95% 7/1/2050
Cenovus Energy Inc.   5.375% 7/15/2025
CNH Industrial Capital LLC   3.875% 10/15/2021
Petrobras Global Finance BV   7.375% 1/17/2027
Cheniere Corpus Christi Hldgs LLC   5.125% 6/30/2027
Crown Castle Intl Corp.   5.25% 1/15/2023
HCA Inc.   3.5% 9/1/2030
Diamondback Energy Inc.   3.5% 12/1/2029
Community Health Systems Inc.   6.25% 3/31/2023
BED Bath & Beyond Inc.   5.165% 8/1/2044
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.11% -0.01% 0.98% 1.04% 5.71% 7.49%
Mining -0.09% 0.39% 76.60% 29.17% -9.62% -6.05%
Construction -0.04% -0.08% 1.81% 3.66% 6.86% 8.03%
Manufacturing -0.06% 0.02% 2.00% 2.51% 3.53% 6.64%
Transportion, Communication, Electric/Gas -0.03% -0.08% 3.29% 3.01% 4.10% 5.79%
Wholesale -0.15% -0.14% 0.91% 0.27% 1.49% 3.31%
Retail -0.08% -0.11% 2.12% 4.95% 2.79% 4.73%
Finance, Insurance, Real-Estate -0.03% -0.09% 1.62% 3.12% 2.41% 4.48%
Services -0.09% -0.30% 1.26% 2.89% 3.62% 5.34%
Public Administration 0.02% -0.15% 1.42% 4.76% 8.19% 10.03%
Energy -0.08% 0.08% 67.22% 25.14% -8.52% -4.52%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Cars.Com Inc. (USD) 6.375% 11/1/2028 144A (10/27/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.38%.

2. Cars.Com Inc. (USD) 6.375% 11/1/2028 Reg S (10/27/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.38%.

3. MPH Acquisition Holdings LLC (USD) 5.75% 11/1/2028 Reg S (10/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

4. MPH Acquisition Holdings LLC (USD) 5.75% 11/1/2028 144A (10/27/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

1. Les Schwab Tire Centers: $1.575MM TLB (B2/B)

2. Highline Aftermarket Acquisition LLC: $735MM TL (B2/B)

3. Imperva: $147MM TL

4. J.D. Power: $100MM incremental TL

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

6. CNT Holdings I Corp.: $1.405B credit facilities: $110MM revolver (B2/B); $980MM TLB (B2/B); $315MM TL (Caa2/CCC+)

7. Amentum: $980MM TL (B1/B)

8. Academy Ltd.: $400MM TL (B2/B)

9. Trugreen LP: $1.425MM TLs: $1.15B TL (B1/B); $275MM (Caa1/CCC+)

10. Highland Holdings: $500MM senior secured PIK (/BB+)

Additional Commentary

NEW ISSUANCE WATCH:   Cars.Com Inc. Inc issued 400MM Notes.
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
OVH Groupe (EUR) TLB E+325 11/29/2026
Rover (USD) TLB2 L+350 11/01/2024
Averys SA (EUR) TLB E+825 09/25/2026
Archroma Global Services (USD) TLB2 L+425 07/11/2024
Tacala LLC (USD) TLB L+350 02/05/2027
BioClinica Inc. (USD) TL L+825 10/06/2024
Dubois Chemicals Inc. (USD) TL L+450 09/30/2026
Sandvine Corp. (USD) TL 10/15/2026
Dental Corp. (USD) TL L+375 06/06/2025

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 10/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 28, 2020
Bond Markets

GLOBAL MARKETS LOWER AGAIN AS COVID CONTINUES TO RAVAGE THE US AND EUROPE. THE LACK OF PROGRESS ON THE STIMULUS AND THE UNCERTAINTY OF THE US ELECTION IS ADDING TO MARKET VOLATILITY. 10 Year Treasury notes were down .3 bps. S&P -3.43%, Dow -3.53%, NASDAQ -3.73%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 44.2 MILLION+ CASES AND 1.17 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 9.1 MILLION+ CASES AND 233000+ 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
+   General Electric Co. 4.35% 5/1/2050 +0.5%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 +0.2%
  Credit Suisse New York 3% 10/29/2021 +0.0%
  NVR Inc. 3% 5/15/2030 +0.1%
  Goldman Sachs Group Inc. VAR% 10/31/2022 +0.0%
–   Boeing Co. 5.805% 5/1/2050 -1.9%
  Boeing Co. 5.15% 5/1/2030 -0.8%
  Vodafone Group PLC 4.25% 9/17/2050 -1.2%
  Walt Disney Co. 2.65% 1/13/2031 -0.3%
  Energy Transfer Operating, LP 5% 5/15/2050 -0.6%
Boeing Co.   5.805% 5/1/2050
General Electric Co.   4.35% 5/1/2050
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Boeing Co.   5.15% 5/1/2030
Vodafone Group PLC   4.25% 9/17/2050
Walt Disney Co.   2.65% 1/13/2031
Energy Transfer Operating, LP   5% 5/15/2050
Boeing Co.   4.875% 5/1/2025
Deutsche Bank AG   VAR% 9/18/2024
Boeing Co.   4.508% 5/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.23% 0.09% 0.22% -0.41% 5.65% 6.89%
Construction 0.02% 0.28% 0.83% 1.93% 6.08% 7.27%
Manufacturing 0.18% 0.09% 0.23% -0.10% 7.48% 8.47%
Transportion, Communication, Electric/Gas 0.24% 0.11% -0.18% -1.24% 8.43% 9.49%
Wholesale 0.16% 0.17% 0.61% 1.11% 7.85% 9.71%
Retail 0.27% 0.14% 0.35% -1.00% 8.81% 10.26%
Finance, Insurance, Real-Estate 0.17% 0.15% 0.39% 0.43% 6.57% 7.66%
Services 0.11% 0.02% 0.10% 0.13% 6.63% 7.35%
Public Administration 0.26% 0.02% -0.07% 0.42% 5.02% 5.14%
Energy 0.21% 0.01% 0.04% -0.85% 4.44% 6.08%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Acuity Brands Inc. (USD) 2.15% 12/15/2030 (10/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.737, Yielding 2.18%.

2. Genuine Parts Co. (USD) 1.875% 11/1/2030 (10/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.069, Yielding 1.98%.

3. Berkshire Hathaway Energy Co. (USD) 1.65% 5/15/2031 144A (10/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.73, Yielding 1.68%.

4. Berkshire Hathaway Energy Co. (USD) 2.85% 5/15/2051 144A (10/27/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.877, Yielding 2.86%.

5. Procter & Gamble Co. (USD) 1.2% 10/29/2030 (10/27/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.55, Yielding 1.25%.

6. Tractor Supply Co. (USD) 1.75% 11/1/2030 (10/27/2020): 650MM Senior Unsecured Notes, Price at Issuance 98.874, Yielding 1.87%.

7. Berkshire Hathaway Energy Co. (USD) 1.65% 5/15/2031 Reg S (10/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.73, Yielding 1.68%.

8. Berkshire Hathaway Energy Co. (USD) 2.85% 5/15/2051 Reg S (10/27/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.877, Yielding 2.86%.

9. Procter & Gamble Co. (USD) 0.55% 10/29/2025 (10/27/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.838, Yielding .58%.

10. Banc of California NA (USD) VAR% 10/30/2030 (10/27/2020): 85MM Subordinated Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH:  Acuity Brands Inc. issued 500 MM in notes.
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
OVH Groupe (EUR) TLB E+325 11/29/2026
Rover (USD) TLB2 L+350 11/01/2024
Averys SA (EUR) TLB E+825 09/25/2026
Archroma Global Services (USD) TLB2 L+425 07/11/2024
Tacala LLC (USD) TLB L+350 02/05/2027
BioClinica Inc. (USD) TL L+825 10/06/2024
Dubois Chemicals Inc. (USD) TL L+450 09/30/2026
Sandvine Corp. (USD) TL 10/15/2026
Dental Corp. (USD) TL L+375 06/06/2025

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 10/28/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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