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North American Bond Research – October 7, 2020

Posted on October 7, 2020
HIGH YIELD BOND RESEARCH
October 7, 2020
Bond Markets

EUROPEAN MARKETS WERE MIXED AND US MARKETS BOUNCED BACK AFTER YESTERDAY’S SELLOFF. PRESIDENT TRUMP REVERSED COURSE AND STATED HE WAS COMMITTED TO REACHING A STIMULUS DEAL. 10 Year Treasury notes were up 4.3 bps. S&P +1.74%, Dow +1.91%, NASDAQ +1.88%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 36.3 MILLION+ CASES AND 1.058 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.76 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
+   Vale Overseas LTD 3.75% 7/8/2030 +0.8%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.2%
  Methanex Corp. 5.125% 10/15/2027 +0.4%
  Western Digital Corp. 4.75% 2/15/2026 +0.2%
  Centene Corp. 3% 10/15/2030 +0.4%
–   Petrobras Global Finance BV 6.85% 6/5/2115 -0.3%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.3%
  General Motors Financial Co. Inc. 4.375% 9/25/2021 -0.2%
  Diamondback Energy Inc. 3.5% 12/1/2029 -0.8%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.6%
Vale Overseas LTD   3.75% 7/8/2030
Petrobras Global Finance BV   6.85% 6/5/2115
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Pacific Gas & Electric Co.   4.55% 7/1/2030
Methanex Corp.   5.125% 10/15/2027
Western Digital Corp.   4.75% 2/15/2026
Centene Corp.   3% 10/15/2030
Communications Sales & Leasing Inc.   8.25% 10/15/2023
Ford Motor Co.   8.5% 4/21/2023
General Motors Financial Co. Inc.   4.375% 9/25/2021
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.12% 0.50% -0.57% 3.90% 5.12% 7.28%
Mining 0.39% 0.35% 0.62% 17.42% -12.42% -9.25%
Construction 0.10% 0.82% 1.06% 5.71% 5.55% 7.59%
Manufacturing 0.11% 0.81% 0.25% 4.42% 2.67% 6.67%
Transportion, Communication, Electric/Gas 0.14% 0.60% -1.10% 2.63% 3.25% 5.36%
Wholesale 0.06% 0.52% -0.35% 2.42% 1.48% 4.21%
Retail 0.14% 0.87% 0.57% 6.55% 2.17% 4.96%
Finance, Insurance, Real-Estate 0.14% 0.76% 0.08% 4.60% 1.55% 4.10%
Services 0.08% 0.55% -0.49% 5.02% 2.22% 5.14%
Public Administration 0.20% 0.45% 0.27% 5.60% 7.21% 9.74%
Energy 0.35% 0.45% -0.06% 15.39% -10.96% -7.83%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Twin River Worldwide Hldgs. Inc. (USD) 6.75% 6/1/2027 (10/06/2020): 125MM Senior Unsecured Notes, Price at Issuance 99.25, Yielding 6.89%.

2. H.B. Fuller Co. (USD) 4.25% 10/15/2028 (10/07/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

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:   H.B. Fuller Co.  issued 300MM of Notes.
Top Widening Loans Top Narrowing Loans
Boardriders Inc. (USD) TLA L+800 10/23/2023
Hornbeck Offshore Services Inc. (USD) L+600 06/15/2023
Emerald Performance Materials (USD) TL L+400 08/12/2025
Precise Bidco BV (EUR) TL 12/31/2049
Mattress Firm (USD) TL EXIT 11/21/2022
Dubois Chemicals Inc. (USD) TL L+450 09/30/2026
Tacala LLC (USD) TLB L+350 02/05/2027
BioClinica Inc. (USD) TL L+825 10/06/2024
Imagina Media Audiovisual SL (EUR) TLA E+400 06/22/2025
Stubhub (EUR) TLB E+350 01/31/2027

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 14 bps (basis points), as of 10/07/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 7, 2020
Bond Markets

EUROPEAN MARKETS WERE MIXED AND US MARKETS BOUNCED BACK AFTER YESTERDAY’S SELLOFF. PRESIDENT TRUMP REVERSED COURSE AND STATED HE WAS COMMITTED TO REACHING A STIMULUS DEAL. 10 Year Treasury notes were up 4.3 bps. S&P +1.74%, Dow +1.91%, NASDAQ +1.88%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 36.3 MILLION+ CASES AND 1.058 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.76 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
+   Vale Overseas LTD 3.75% 7/8/2030 +0.8%
  BP Capital Markets PLC 3% 2/24/2050 +0.7%
  Lowe’s Companies Inc. 5.125% 4/15/2050 +1.2%
  CVS Health Corp. 4.78% 3/25/2038 +0.1%
  General Electric Co. 4.35% 5/1/2050 +1.1%
–   Boeing Co. 5.805% 5/1/2050 -0.6%
  AT&T Inc. 2.25% 2/1/2032 -0.2%
  Boeing Co. 5.15% 5/1/2030 -0.8%
  Verizon Communications Inc. 4.329% 9/21/2028 -0.4%
  CVS Health Corp. 4.3% 3/25/2028 -0.0%
Boeing Co.   5.805% 5/1/2050
Vale Overseas LTD   3.75% 7/8/2030
AT&T Inc.   2.25% 2/1/2032
Boeing Co.   5.15% 5/1/2030
BP Capital Markets PLC   3% 2/24/2050
Lowe’s Companies Inc.   5.125% 4/15/2050
Verizon Communications Inc.   4.329% 9/21/2028
CVS Health Corp.   4.78% 3/25/2038
CVS Health Corp.   4.3% 3/25/2028
General Electric Co.   4.35% 5/1/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.17% -0.26% -0.89% 2.00% 5.00% 5.14%
Construction -0.01% -0.23% 0.29% 3.18% 5.40% 5.23%
Manufacturing 0.17% -0.14% -0.04% 1.36% 6.89% 7.00%
Transportion, Communication, Electric/Gas 0.23% -0.45% -0.70% 1.06% 7.65% 7.57%
Wholesale 0.15% 0.01% 0.16% 2.24% 6.97% 8.02%
Retail 0.25% -0.24% -0.17% 0.55% 7.91% 8.33%
Finance, Insurance, Real-Estate 0.14% -0.03% -0.05% 1.25% 5.95% 6.39%
Services 0.18% -0.07% -0.01% 1.47% 6.58% 6.49%
Public Administration 0.27% -0.12% 0.19% 0.21% 4.83% 4.18%
Energy 0.17% -0.36% -1.32% 1.10% 3.68% 4.26%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Athene Holding LTD (USD) 3.5% 1/15/2031 (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.535, Yielding 3.67%.

2. Standard Chartered PLC (USD) VAR% 10/14/2023 144A (10/06/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100.

3. John Deere Capital Corp. (USD) 0.4% 10/10/2023 (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.884, Yielding .44%.

4. MassMutual Global Funding II (USD) 1.55% 10/9/2030 144A (10/06/2020): 750MM Secured Notes, Price at Issuance 99.567, Yielding 1.6%.

5. WP Carey Inc. (USD) 2.4% 2/1/2031 (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.099, Yielding 2.5%.

6. Standard Chartered PLC (USD) FLT% 10/14/2023 144A (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 100.

7. THE Children’S Hospital Of Philadelphia (USD) 2.704% 7/1/2050 (10/06/2020): 500MM Secured Notes, Price at Issuance 100, Yielding 2.7%.

8. LYB Intl. Finance III LLC (USD) 3.625% 4/1/2051 (10/06/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.707, Yielding 3.64%.

9. LYB Intl. Finance III LLC (USD) 3.8% 10/1/2060 (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.166, Yielding 3.84%.

10. LYB Intl. Finance III LLC (USD) 2.25% 10/1/2030 (10/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.203, Yielding 2.34%.

Additional Commentary

NEW ISSUANCE WATCH:  Athene Holding LTD issued 500MM in notes.
Top Widening Loans Top Narrowing Loans
Boardriders Inc. (USD) TLA L+800 10/23/2023
Hornbeck Offshore Services Inc. (USD) L+600 06/15/2023
Emerald Performance Materials (USD) TL L+400 08/12/2025
Precise Bidco BV (EUR) TL 12/31/2049
Mattress Firm (USD) TL EXIT 11/21/2022
Dubois Chemicals Inc. (USD) TL L+450 09/30/2026
Tacala LLC (USD) TLB L+350 02/05/2027
BioClinica Inc. (USD) TL L+825 10/06/2024
Imagina Media Audiovisual SL (EUR) TLA E+400 06/22/2025
Stubhub (EUR) TLB E+350 01/31/2027

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 14 bps (basis points), as of 10/07/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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