North American Bond Research - October 30, 2019

THE FEDERAL RESERVE REDUCED RATES BY 25 BASIS POINTS to a new target range of 1.5% to 1.75% largely due to global growth concerns and low inflation. The Federal Open Markets Committee stated they will, “continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the fed-funds rate.” The 10-year note fell 6.5 basis points. S&P +0.33%, DOW +0.43, NASDAQ +0.33%

THE 30-YEAR TREASURY NOTE FELL 8.2 BASIS POINTS marking its largest daily drop in more than a month following the Feds decision to cut the rate. “The current stance of policy is likely to remain appropriate as long as incoming information about the economy remains broadly consistent,” Fed Chairman Jerome Powell. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Georgia Power Co. (USD) 4.75% 9/1/2040 made analysts’ ‘Conviction Buy’ list. (See the chart below for ADI Indices) Corey Mahoney

Key Gainers and Losers

Volume Leaders

+	Pacific Gas & Electric Co. 3.5% 10/1/2020	+ 4.9%
	Ally Financial Inc. 3.875% 5/21/2024	+ 0.3%
–	Western Digital Corp. 4.75% 2/15/2026	-0.2%

Pacific Gas & Electric Co. 6.05% 3/1/2034
Antero Resources Corp. 5.125% 12/1/2022

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	-0.19%	-0.12%	1.39%	3.77%	17.54%	16.97%
Mining	-0.09%	-0.06%	-2.41%	-3.57%	4.82%	-0.16%
Construction	-0.10%	0.20%	1.38%	3.66%	15.70%	14.86%
Manufacturing	-0.03%	0.08%	0.90%	2.12%	11.52%	9.82%
Transportion, Communication, Electric/Gas	-0.09%	-0.27%	0.35%	1.73%	13.39%	11.47%
Wholesale	-0.10%	0.21%	0.26%	0.98%	11.80%	9.33%
Retail	-0.05%	0.08%	0.66%	1.81%	15.38%	12.93%
Finance, Insurance, Real-Estate	-0.03%	0.21%	0.72%	2.25%	13.13%	11.31%
Services	-0.05%	0.19%	0.79%	2.14%	12.04%	10.77%
Public Administration	0.12%	0.03%	1.23%	2.61%	13.97%	14.84%
Energy	-0.10%	-0.08%	-2.20%	-2.99%	5.74%	0.91%

Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
1. BBA US Hldg Inc. (USD) 4% 3/1/2028 Reg S (10/29/2019): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%. 2. TransDigm Group Inc. (USD) 5.5% 11/15/2027 Reg S (10/30/2019): 2650MM Senior Subordinated Notes, Price at Issuance 100, Yielding 5.5%.	1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019 2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

New Issues

Forward Calendar

1. BBA US Hldg Inc. (USD) 4% 3/1/2028 Reg S (10/29/2019): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

2. TransDigm Group Inc. (USD) 5.5% 11/15/2027 Reg S (10/30/2019): 2650MM Senior Subordinated Notes, Price at Issuance 100, Yielding 5.5%.

1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Calpine Corp.: $1.4B bonds, Expected Q4 2019

NEW ISSUANCE WATCH: on 10/30/19 participants welcome a $2650MM new corporate-bond offering by
TransDigm Group Inc. The most recent data showed a money flowed out of ETF/mutual funds for the week ended 10/11/2019, with a net outflow of $1.5 billion

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:

Cole-Parmer Instrument Co., United Pacific, Flexitallic, McDermott International Inc.

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 32 bp (basis points), as of 10/30/19
Net positive capital flows into high-yield ETFs & mutual funds

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.

THE FEDERAL RESERVE REDUCED RATES BY 25 BASIS POINTS to a new target range of 1.5% to 1.75% largely due to global growth concerns and low inflation. The Federal Open Markets Committee stated they will, “continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the fed-funds rate.” The 10-year note fell 6.5 basis points. S&P +0.33%, DOW +0.43, NASDAQ +0.33%

THE 30-YEAR TREASURY NOTE FELL 8.2 BASIS POINTS marking its largest daily drop in more than a month following the Feds decision to cut the rate. “The current stance of policy is likely to remain appropriate as long as incoming information about the economy remains broadly consistent,” Fed Chairman Jerome Powell. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Georgia Power Co. (USD) 4.75% 9/1/2040 made analysts’ ‘Conviction Buy’ list. (See the chart for Georgia Power Co. bonds below) Corey Mahoney

Key Gainers and Losers

Volume Leaders

+	CVS Health Corp. 5.05% 3/25/2048	+ 0.4%
	GE Capital Intl. Funding Co. 4.418% 11/15/2035	+ 1.3%
–	Toyota Motor Credit Corp. VAR% 5/17/2022	-0.3%

GE Capital Intl. Funding Co. 4.418% 11/15/2035
Edison Int 4.125% 3/15/2028

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.01%	0.04%	0.14%	1.04%	5.10%	6.01%
Mining	0.02%	-0.23%	-0.51%	2.01%	11.66%	11.89%
Construction	0.03%	-0.19%	-0.19%	1.92%	9.65%	10.39%
Manufacturing	0.01%	-0.18%	-0.10%	2.61%	10.93%	11.50%
Transportion, Communication, Electric/Gas	-0.02%	-0.30%	-0.37%	2.86%	13.37%	14.62%
Wholesale	0.03%	-0.09%	0.12%	2.50%	12.29%	11.78%
Retail	0.03%	-0.21%	-0.12%	3.04%	12.14%	13.08%
Finance, Insurance, Real-Estate	0.01%	-0.12%	0.09%	2.08%	9.31%	10.20%
Services	-0.02%	-0.31%	-0.09%	2.63%	10.66%	12.01%
Public Administration	-0.02%	-0.17%	-0.11%	1.10%	3.96%	5.38%
Energy	0.00%	-0.22%	-0.52%	1.91%	11.90%	11.90%

Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. DH Europe Finance SA (USD) 3.4% 11/15/2049 (10/29/2019): 900MM Senior Unsecured Notes, Price at Issuance 99.756, Yielding 3.41%. 2. State Street Corp. (USD) 2.354% 11/1/2025 (10/29/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.35%.

New Issues

New Issues [Continued]

1. DH Europe Finance SA (USD) 3.4% 11/15/2049 (10/29/2019): 900MM Senior Unsecured Notes, Price at Issuance 99.756, Yielding 3.41%.

2. State Street Corp. (USD) 2.354% 11/1/2025 (10/29/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.35%.

NEW ISSUANCE WATCH: on 10/29/19 participants welcome a $200MM new corporate-bond offering by
Penn State Health.The most recent data showed a money flowed out of ETF/mutual funds for the week ended 10/11/2019, with a net outflow of $1.5 billion.

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)	SuperValu Inc. (5Y Sen USD MR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Cole-Parmer Instrument Co., United Pacific, Flexitallic, McDermott International Inc.

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 32 bp (basis points), as of 10/30/19
Net positive capital flows into high-yield ETFs & mutual funds

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.

North American Bond Research – October 30, 2019

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