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North American Bond Research – October 6, 2020

Posted on October 6, 2020
HIGH YIELD BOND RESEARCH
October 6, 2020
Bond Markets

GLOBAL MARKETS WERE WAY UP UNTIL PRESIDENT TRUMP DECIDED TO PULL OUT OF THE STIMULUS NEGOTIATIONS UNTIL AFTER THE ELECTION. US MARKETS FELL OVER 1%.  10 Year Treasury notes were down 2.2 bps. S&P -1.40 %, Dow -1.34%, NASDAQ -1.57%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 36 MILLION+ CASES AND 1.053 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.7 MILLION+ CASES AND 216000+ 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 +2.1%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.6%
  Delta Airlines 7.375% 1/15/2026 +1.8%
  Broadcom LTD 4.7% 4/15/2025 +0.1%
  Broadcom LTD 4.3% 11/15/2032 +0.6%
–   Vale Overseas LTD 3.75% 7/8/2030 -1.1%
  Petrobras Global Finance BV 6.85% 6/5/2115 -0.3%
  HCA Inc. 3.5% 9/1/2030 -0.1%
  Western Midstream Operating, LP 4.05% 2/1/2030 -0.1%
  HCA Inc. 5.25% 4/15/2025 -0.1%
Pacific Gas & Electric Co.   4.95% 7/1/2050
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Vale Overseas LTD   3.75% 7/8/2030
Delta Airlines   7.375% 1/15/2026
Petrobras Global Finance BV   6.85% 6/5/2115
Broadcom LTD   4.7% 4/15/2025
HCA Inc.   3.5% 9/1/2030
Broadcom LTD   4.3% 11/15/2032
Western Midstream Operating, LP   4.05% 2/1/2030
Centene Corp.   3% 10/15/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.02% 0.14% -0.98% 3.75% 4.90% 7.00%
Mining 0.37% 0.21% 0.12% 12.31% -12.90% -9.81%
Construction 0.20% 0.70% 0.83% 5.78% 4.92% 7.01%
Manufacturing 0.20% 0.66% -0.06% 4.43% 2.33% 6.36%
Transportion, Communication, Electric/Gas 0.11% 0.50% -1.29% 2.86% 2.97% 5.14%
Wholesale 0.09% 0.38% -0.49% 2.74% 1.22% 4.15%
Retail 0.11% 0.61% 0.32% 6.77% 1.88% 4.85%
Finance, Insurance, Real-Estate 0.17% 0.65% 0.02% 4.64% 2.10% 4.77%
Services 0.19% 0.77% -0.35% 5.40% 2.15% 5.40%
Public Administration 0.15% 0.26% 0.09% 5.30% 6.99% 9.54%
Energy 0.34% 0.21% -0.75% 10.64% -12.03% -9.01%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. AMN Healthcare Inc. (USD) 4% 4/15/2029 144A (10/05/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

2. AMN Healthcare Inc. (USD) 4% 4/15/2029 Reg S (10/05/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

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

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

3. Fly Leasing LTD: $180MM TLB (Ba3/BBB-)

4. Maravai Lifesciences: $750MM credit facilities: $150MM revolver; $600MM TLB

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

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

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

8. Wheelabrator Technologies Inc.: $1.3965B TLB

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

10. Wheelabrator Technologies Inc.: $1.3965B TLB

Additional Commentary

NEW ISSUANCE WATCH:   AMN Healthcare Inc. issued 350MM of Notes.
Top Widening Loans Top Narrowing Loans
Wittur (EUR) TL E+850 09/19/2027
Acetow (EUR) TLB L+475 05/31/2023
Aruba Investments Inc. (EUR) TLB E+425 07/01/2025
EG Group (USD) TLB L+400 02/06/2025
Casmar Holdings Australia PTY LTD (USD) TLB L+450 12/07/2023
Ball Corp. (USD) TLA L+150 03/21/2024
Greenway Health LLC (USD) TL L+375 02/16/2024
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Alorica (USD) TL L+375 06/30/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026

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 bps (basis points), as of 10/06/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 6, 2020
Bond Markets

GLOBAL MARKETS WERE WAY UP UNTIL PRESIDENT TRUMP DECIDED TO PULL OUT OF THE STIMULUS NEGOTIATIONS UNTIL AFTER THE ELECTION. US MARKETS FELL OVER 1%.  10 Year Treasury notes were down 2.2 bps. S&P -1.40 %, Dow -1.34%, NASDAQ -1.57%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 36 MILLION+ CASES AND 1.053 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.7 MILLION+ CASES AND 216000+ 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
+   CVS Health Corp. 5.05% 3/25/2048 +0.6%
  Gilead Sciences Inc. 2.8% 10/1/2050 +1.7%
  Alphabet Inc. 2.05% 8/15/2050 +0.9%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +2.1%
  Boeing Co. 5.805% 5/1/2050 +0.6%
–   General Electric Co. 4.35% 5/1/2050 -2.1%
  JPMorgan Chase & Co. 2.522% 4/22/2031 -0.2%
  Dow Chemical Co. 3.6% 11/15/2050 -0.4%
  Visa Inc. 2% 8/15/2050 -0.0%
  Home Depot Inc. 2% 4/1/2021 -0.2%
CVS Health Corp.   5.05% 3/25/2048
Gilead Sciences Inc.   2.8% 10/1/2050
Alphabet Inc.   2.05% 8/15/2050
General Electric Co.   4.35% 5/1/2050
Pacific Gas & Electric Co.   4.95% 7/1/2050
Boeing Co.   5.805% 5/1/2050
Boeing Co.   5.15% 5/1/2030
Pacific Gas & Electric Co.   2.5% 2/1/2031
Bank of America Corp.   1.898% 7/23/2031
CVS Health Corp.   4.3% 3/25/2028
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.33% -0.47% -1.08% 1.73% 4.60% 4.79%
Construction -0.17% -0.36% 0.70% 3.28% 4.92% 4.81%
Manufacturing -0.26% -0.19% -0.22% 1.35% 6.71% 6.87%
Transportion, Communication, Electric/Gas -0.49% -0.65% -0.94% 1.04% 7.50% 7.47%
Wholesale -0.19% -0.18% -0.13% 2.12% 6.61% 7.84%
Retail -0.35% -0.35% -0.46% 0.55% 7.59% 8.12%
Finance, Insurance, Real-Estate -0.18% -0.04% -0.18% 1.25% 5.79% 6.24%
Services -0.21% -0.18% -0.26% 1.36% 6.43% 6.43%
Public Administration -0.33% -0.13% -0.08% -0.07% 4.54% 3.89%
Energy -0.39% -0.58% -1.55% 0.94% 3.28% 3.88%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Crombie REIT (CAD) 2.686% 3/31/2028 (10/05/2020): 150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.69%.

2. Hydro One Inc. (CAD) 0.71% 1/16/2023 (10/05/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.98, Yielding .72%.

3. General Mills Inc. (USD) 6.41% 10/15/2022 (10/05/2020): 100MM Unsecured Notes, Price at Issuance 111.299, Yielding .78%.

4. Leidos Inc. (USD) 2.3% 2/15/2031 144A (10/05/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.517, Yielding 2.35%.

5. Protective Life Global Funding (USD) 0.631% 10/13/2023 144A (10/05/2020): 500MM Secured Notes, Price at Issuance 100, Yielding .63%.

6. Everest Reinsurance Holdings Inc. (USD) 3.5% 10/15/2050 (10/05/2020): 1000MM Senior Unsecured Notes, Price at Issuance 98.844, Yielding 3.56%.

7. Leidos Inc. (USD) 2.3% 2/15/2031 Reg S (10/05/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.517, Yielding 2.35%.

8. Protective Life Global Funding (USD) 0.631% 10/13/2023 Reg S (10/05/2020): 500MM Secured Notes, Price at Issuance 100, Yielding .63%.

9. WEC Energy Group Inc. (USD) 1.375% 10/15/2027 (10/05/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.92, Yielding 1.39%.

10. WEC Energy Group Inc. (USD) 1.8% 10/15/2030 (10/05/2020): 450MM Senior Unsecured Notes, Price at Issuance 99.909, Yielding 1.81%.

Additional Commentary

NEW ISSUANCE WATCH:  Leidos Inc. issued 1000MM in notes.
Top Widening Loans Top Narrowing Loans
Wittur (EUR) TL E+850 09/19/2027
Acetow (EUR) TLB L+475 05/31/2023
Aruba Investments Inc. (EUR) TLB E+425 07/01/2025
EG Group (USD) TLB L+400 02/06/2025
Casmar Holdings Australia PTY LTD (USD) TLB L+450 12/07/2023
Ball Corp. (USD) TLA L+150 03/21/2024
Greenway Health LLC (USD) TL L+375 02/16/2024
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Alorica (USD) TL L+375 06/30/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026

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 bps (basis points), as of 10/06/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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