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North American Bond Research – September 15, 2020

Posted on September 15, 2020
HIGH YIELD BOND RESEARCH
September 15, 2020
Bond Markets

GLOBAL MARKETS ARE UP AS CHINA REPORTED BETTER ECONOMIC DATA OF 5.6% MANUFACTURING GROWTH, VERSUS 5.1 CONSENSUS AND CONSUMER SALES ROSE 0.5% FOR THE MONTH OF AUGUST. 10 Year Treasury notes were up .8 bps. S&P +0.52%, Dow +0.01%, NASDAQ +1.21%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 29.7 MILLION+ CASES AND 938000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.8 MILLION+ CASES AND 200000+ 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
+   HCA Inc. 5% 3/15/2024 +0.0%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.6%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.1%
  Broadcom LTD 4.7% 4/15/2025 +0.2%
  Equinix Inc. 5.375% 5/15/2027 +0.7%
–   Cheniere Corpus Christi Hldgs LLC 5.125% 6/30/2027 -0.0%
  Cheniere Corpus Christi Hldgs LLC 7% 6/30/2024 -0.2%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.1%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.1%
  Delta Airlines 2.9% 10/28/2024 -0.3%
HCA Inc.   5% 3/15/2024
Pacific Gas & Electric Co.   4.95% 7/1/2050
Cheniere Corpus Christi Hldgs LLC   5.125% 6/30/2027
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Cheniere Corpus Christi Hldgs LLC   7% 6/30/2024
Pacific Gas & Electric Co.   4.55% 7/1/2030
Broadcom LTD   4.7% 4/15/2025
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Equinix Inc.   5.375% 5/15/2027
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.05% -0.25% 0.21% 4.23% 5.05% 8.26%
Mining -0.36% -1.80% 0.76% 5.59% -9.57% -5.63%
Construction 0.03% 0.07% 4.92% 5.51% 4.40% 7.11%
Manufacturing 0.05% -0.13% 0.30% 4.70% 2.40% 6.43%
Transportion, Communication, Electric/Gas -0.00% -0.68% 0.33% 3.32% 3.99% 6.45%
Wholesale 0.00% -0.32% -0.93% 2.79% 1.67% 4.86%
Retail -0.03% 0.30% 1.76% 6.06% 2.23% 4.90%
Finance, Insurance, Real-Estate 0.02% 0.02% 1.05% 4.97% 1.87% 4.60%
Services 0.02% -0.09% 1.03% 4.30% 4.13% 5.61%
Public Administration 0.21% 0.60% 1.83% 7.50% 7.56% 10.84%
Energy -0.33% -1.74% 0.35% 4.74% -8.03% -4.10%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Gartner Inc. (USD) 3.75% 10/1/2030 144A (09/14/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

2. Hologic Inc. (USD) 3.25% 2/15/2029 144A (09/14/2020): 950MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.25%.

3. NEW Residential Investment Corp. (USD) 6.25% 10/15/2025 144A (09/14/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

4. Uber Technologies Inc. (USD) 6.25% 1/14/2028 144A (09/14/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

5. Gartner Inc. (USD) 3.75% 10/1/2030 Reg S (09/14/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

6. Hologic Inc. (USD) 3.25% 2/15/2029 Reg S (09/14/2020): 950MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.25%.

7. NEW Residential Investment Corp. (USD) 6.25% 10/15/2025 Reg S (09/14/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

8. Uber Technologies Inc. (USD) 6.25% 1/15/2028 Reg S (09/14/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

9. Shea Homes LP (USD) 4.75% 4/1/2029 144A (09/14/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

10. Shea Homes LP (USD) 4.75% 4/1/2029 Reg S (09/14/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

1. Allegro Microsystems Inc.: $325MM TL

2. Cablevision Lightpath: $600MM TL (B1/B+)

3. CJ Foods Inc.: $285MM TLB

4. MAG Aerospace: $290.7MM TL (B3/B)

5. Michael Cos Inc.: $1.62B TLB (B+)

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

7. RCN Grande: $1.19B TLB

8. MAG Aerospace: $290.7MM TL (B3/B)

9. CJ Foods Inc.: $285MM TLB

10. Cablevision Lightpath: $600MM TL (B1/B+)

Additional Commentary

NEW ISSUANCE WATCH: Shea Homes LP  issued 300MM in notes
Top Widening Loans Top Narrowing Loans
Corialis (GBP) TL L+850 03/31/2025
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
BBB Industries LLC (USD) TL L+450 08/01/2025
Averys SA (EUR) TLB E+825 09/25/2026
CPV Shore LLC (USD) TLB L+375 12/27/2025
Valeo Foods Group LTD (GBP) TL L+850 08/27/2028
United PF Holdings LLC (USD) TL L+400 01/06/2027
Kindercare Education LLC (USD) TL L+825 08/16/2025
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Encapsys LLC (USD) TL L+350 11/07/2024

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 bp (basis points), as of 09/15/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
September 15, 2020
Bond Markets

GLOBAL MARKETS ARE UP AS CHINA REPORTED BETTER ECONOMIC DATA OF 5.6% MANUFACTURING GROWTH, VERSUS 5.1 CONSENSUS AND CONSUMER SALES ROSE 0.5% FOR THE MONTH OF AUGUST. 10 Year Treasury notes were up .8 bps. S&P +0.52%, Dow +0.01%, NASDAQ +1.21%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 29.7 MILLION+ CASES AND 938000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.8 MILLION+ CASES AND 200000+ 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
+   Enterprise Products Operating LLC 2.8% 1/31/2030 +0.0%
  Suzano Austria GmbH 3.75% 1/15/2031 +0.5%
  Oracle Corp. 3.85% 4/1/2060 +0.8%
  Deutsche Bank AG VAR% 9/18/2031 +0.4%
  Southwest Airlines Co. 5.25% 5/4/2025 +0.5%
–   Toronto-Dominion Bank 0.75% 9/11/2025 -0.2%
  Dupont de Nemours Inc. 2.169% 5/1/2023 -0.2%
  Bank of America Corp. VAR% 6/19/2026 -0.0%
  Fidelity National Financial Inc. 2.45% 3/15/2031 -4.1%
  BP Capital Markets America Inc. 2.772% 11/10/2050 -0.2%
Enterprise Products Operating LLC   2.8% 1/31/2030
Toronto-Dominion Bank   0.75% 9/11/2025
Suzano Austria GmbH   3.75% 1/15/2031
Dupont de Nemours Inc.   2.169% 5/1/2023
Oracle Corp.   3.85% 4/1/2060
Deutsche Bank AG   VAR% 9/18/2031
Southwest Airlines Co.   5.25% 5/4/2025
Boeing Co.   5.15% 5/1/2030
Lowe’s Companies Inc.   4.5% 4/15/2030
Cummins Inc.   1.5% 9/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.10% -0.22% -0.20% 3.62% 5.50% 8.00%
Construction 0.36% 0.09% 0.04% 4.34% 6.14% 8.74%
Manufacturing -0.01% 0.20% 0.06% 2.92% 7.33% 9.82%
Transportion, Communication, Electric/Gas 0.01% 0.00% -0.38% 3.13% 8.51% 11.44%
Wholesale -0.03% 0.17% 0.40% 3.25% 6.80% 10.31%
Retail -0.01% 0.09% -0.21% 2.16% 8.04% 11.06%
Finance, Insurance, Real-Estate -0.02% 0.08% 0.00% 2.39% 6.07% 8.38%
Services -0.03% 0.18% 0.17% 3.00% 6.91% 9.31%
Public Administration -0.03% -0.01% -0.13% 0.22% 4.78% 5.19%
Energy -0.10% -0.27% -0.80% 2.85% 4.57% 7.47%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Flowserve Corp. (USD) 3.5% 10/1/2030 (09/14/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.656, Yielding 3.54%.

2. Summit Industrial Income Reit (CAD) 2.15% 9/17/2025 (09/14/2020): 250MM Senior Unsecured Notes, Price at Issuance 99.962, Yielding 2.16%.

3. HollyFrontier Corp. (USD) 2.625% 10/1/2023 (09/14/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.894, Yielding 2.66%.

4. HollyFrontier Corp. (USD) 4.5% 10/1/2030 (09/14/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.824, Yielding 4.52%.

5. Healthcare Trust of America Inc. (USD) 2% 3/15/2031 (09/14/2020): 800MM Senior Unsecured Notes, Price at Issuance 99.196, Yielding 2.09%.

6. WEC Energy Group Inc. (USD) 0.55% 9/15/2023 (09/14/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.964, Yielding .56%.

7. Protective Life Global Funding (USD) 1.737% 9/21/2030 144A (09/14/2020): 350MM Secured Notes, Price at Issuance 100, Yielding 1.74%.

8. Empower Finance 2020 LP (USD) 3.075% 9/17/2051 144A (09/14/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.08%.

9. Coca-Cola Co. (USD) 2.5% 3/15/2051 (09/14/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.386, Yielding 2.53%.

10. Coca-Cola Co. (USD) 1% 3/15/2028 (09/14/2020): 1300MM Senior Unsecured Notes, Price at Issuance 99.921, Yielding 1.01%.

Additional Commentary

NEW ISSUANCE WATCH: Coca-Cola Co. issued 2800MM in notes.
Top Widening Loans Top Narrowing Loans
Corialis (GBP) TL L+850 03/31/2025
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
BBB Industries LLC (USD) TL L+450 08/01/2025
Averys SA (EUR) TLB E+825 09/25/2026
CPV Shore LLC (USD) TLB L+375 12/27/2025
Valeo Foods Group LTD (GBP) TL L+850 08/27/2028
United PF Holdings LLC (USD) TL L+400 01/06/2027
Kindercare Education LLC (USD) TL L+825 08/16/2025
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Encapsys LLC (USD) TL L+350 11/07/2024

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 bp (basis points), as of 09/15/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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