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North American Bond Research – September 23, 2020

Posted on September 23, 2020
HIGH YIELD BOND RESEARCH
September 23, 2020
Bond Markets

EUROPEAN MARKETS WERE UP AS US MARKETS GET NAILED. THE BUXX DOLLAR INDEX SHOWED THE DOLLAR STRENGTHING AGAINST THE EURO SENDING EUROPEAN MARKET HIGHER. US MARKETS DOWN AS THE PROSPECTS OF AN AID BILL PASSING FALLS DUE TO SENATE’S SHIFTING ATTENTION TO CONFIRMATION VOTE  TO REPLACE JUSTICE GINSBERG. 10 Year Treasury notes were up 1.2 bps. S&P -2.37%, Dow -1.92%, NASDAQ -3.02%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 32 MILLION+ CASES AND 980000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.13 MILLION+ CASES AND 206000+ 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
+   General Motors Co. 5.2% 4/1/2045 +0.3%
  Genesis Energy LP 7.75% 2/1/2028 +0.1%
  Centene Corp. 5.25% 4/1/2025 144A +0.7%
  JBS Investments GmbH 5.75% 7/30/2028 Reg S +0.2%
  Centene Corp. 5.25% 4/1/2025 Reg S +0.2%
–   T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.6%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -1.0%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.3%
  Centene Corp. 4.25% 12/15/2027 -0.0%
  Communications Sales & Leasing Inc. 8.25% 10/15/2023 -0.7%
General Motors Co.   5.2% 4/1/2045
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Pacific Gas & Electric Co.   4.55% 7/1/2030
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Genesis Energy LP   7.75% 2/1/2028
Centene Corp.   4.25% 12/15/2027
Communications Sales & Leasing Inc.   8.25% 10/15/2023
Centene Corp.   5.25% 4/1/2025 144A
Delta Airlines   7.375% 1/15/2026
Petrobras Global Finance BV   8.75% 5/23/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.19% -0.26% 0.15% 3.67% 5.25% 8.10%
Mining -0.37% -0.72% -1.67% 2.53% -10.74% -8.93%
Construction -0.05% -0.00% 4.96% 4.72% 4.54% 7.00%
Manufacturing -0.10% -0.11% 0.51% 3.83% 2.07% 5.91%
Transportion, Communication, Electric/Gas -0.11% -0.48% 0.12% 2.35% 3.64% 5.62%
Wholesale -0.13% -0.28% -0.83% 2.23% 1.57% 4.50%
Retail -0.09% -0.31% 1.27% 5.69% 1.97% 4.52%
Finance, Insurance, Real-Estate -0.14% -0.36% 0.50% 3.80% 1.34% 3.80%
Services -0.14% -0.49% 0.70% 3.58% 4.21% 5.08%
Public Administration 0.20% -0.51% 1.42% 6.18% 7.54% 10.77%
Energy -0.40% -0.92% -1.91% 1.88% -9.51% -7.44%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. T-Mobile USA Inc. (USD) 3.3% 2/15/2051 144A (09/22/2020): 1500MM Secured Notes, Price at Issuance 99.793, Yielding 3.31%.

2. T-Mobile USA Inc. (USD) 3% 2/15/2041 144A (09/22/2020): 1250MM Secured Notes, Price at Issuance 99.459, Yielding 3.04%.

3. AmWINS Group Inc. (USD) 7.75% 7/1/2026 (09/22/2020): 100MM Senior Unsecured Notes, Price at Issuance 106, Yielding 6.48%.

4. CFLD Investment LTD (USD) 8.75% 9/28/2022 (09/23/2020): 330MM Senior Unsecured Notes.

1. MAG Aerospace: $290.7MM TL (B3/B)

2. Omnitracs LLC: $355MM TLs: $160MM TL (B2/B-); $195MM TL (Caa2/CCC)

3. American Residential Services: $470MM TLB

4. Allegro Microsystems Inc.: $325MM TL

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

6. Vistra: $590MM TLs: $28MM incremental TLB; $562MM TLB

7. MAG Aerospace: $290.7MM TL (B3/B)

8. EFS Cogen Holdings LLC: $1.05B credit facilities: $100MM revolver (Ba2/BB-); $950MM TLB (Ba3/BB-)

9. American Residential Services: $470MM TLB

10. Allegro Microsystems Inc.: $325MM TL

Additional Commentary

NEW ISSUANCE WATCH:   T-Mobile USA Inc. issued 2750 MM in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Compass IV LTD (EUR) TL E+800 05/09/2026
Encapsys LLC (USD) TL L+350 11/07/2024
Deoleo SA (EUR) TL 06/24/2026
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Mavenir Inc. (USD) TLB L+600 05/08/2025
Wittur (EUR) TL E+850 09/19/2027

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 bp (basis points), as of 09/23/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 23, 2020
Bond Markets

EUROPEAN MARKETS WERE UP AS US MARKETS GET NAILED. THE BUXX DOLLAR INDEX SHOWED THE DOLLAR STRENGTHING AGAINST THE EURO SENDING EUROPEAN MARKET HIGHER. US MARKETS DOWN AS THE PROSPECTS OF AN AID BILL PASSING FALLS DUE TO SENATE’S SHIFTING ATTENTION TO CONFIRMATION VOTE  TO REPLACE JUSTICE GINSBERG. 10 Year Treasury notes were up 1.2 bps. S&P -2.37%, Dow -1.92%, NASDAQ -3.02%..
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 32 MILLION+ CASES AND 980000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.13 MILLION+ CASES AND 206000+ 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
+   Bank of America Corp. FLT% 1/20/2023 +0.0%
  BAT Cap Corp. 4.39% 8/15/2037 +0.1%
  Westpac Banking Corp. VAR% 2/4/2030 +0.2%
  Coca-Cola Co. 2.2% 5/25/2022 +0.0%
  Truist Bank 1.25% 3/9/2023 +0.6%
–   John Deere Capital Corp. 2.95% 4/1/2022 -0.0%
  Amgen Inc. 2.3% 2/25/2031 -0.4%
  Southern Co. 4% 1/15/2051 -0.1%
  HCA Inc. 5.25% 6/15/2049 -3.4%
  Bank of America Corp. 1.898% 7/23/2031 -0.3%
John Deere Capital Corp.   2.95% 4/1/2022
Bank of America Corp.   FLT% 1/20/2023
Amgen Inc.   2.3% 2/25/2031
Southern Co.   4% 1/15/2051
HCA Inc.   5.25% 6/15/2049
Bank of America Corp.   1.898% 7/23/2031
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Deutsche Bank AG   VAR% 9/18/2031
Boeing Co.   5.805% 5/1/2050
BAT Cap Corp.   4.39% 8/15/2037
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.06% 0.13% -0.10% 3.19% 5.90% 7.03%
Construction 0.10% 0.55% 0.62% 3.07% 5.59% 6.90%
Manufacturing 0.09% 0.09% 0.23% 2.38% 7.60% 9.00%
Transportion, Communication, Electric/Gas 0.10% 0.13% -0.01% 2.59% 8.84% 10.23%
Wholesale -0.02% 0.10% 0.52% 2.49% 7.05% 9.57%
Retail 0.12% 0.15% 0.19% 1.85% 8.40% 10.21%
Finance, Insurance, Real-Estate 0.05% 0.01% 0.11% 1.90% 6.32% 7.88%
Services 0.10% 0.01% 0.30% 2.28% 7.00% 8.27%
Public Administration -0.21% -0.22% -0.17% 0.27% 4.88% 4.98%
Energy 0.03% 0.04% -0.22% 2.36% 4.76% 6.28%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. BAT Intl. Finance PLC (USD) 1.668% 3/25/2026 (09/22/2020): 1500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.67%.

2. T-Mobile USA Inc. (USD) 2.05% 2/15/2028 (09/22/2020): 500MM Secured Notes, Price at Issuance 102.659, Yielding 1.67%.

3. Advance Auto Parts Inc. (USD) 1.75% 10/1/2027 (09/22/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.672, Yielding 1.8%.

4. Xcel Energy Inc. (USD) 0.5% 10/15/2023 (09/22/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.906, Yielding .53%.

5. Kemper Corp. (USD) 2.4% 9/30/2030 (09/22/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.859, Yielding 2.42%.

6. San Diego Gas & Electric Co. (USD) 1.7% 10/1/2030 (09/22/2020): 800MM Secured Notes, Price at Issuance 99.826, Yielding 1.72%.

7. Blackstone Holdings Finance (USD) 1.6% 3/30/2031 144A (09/22/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.817, Yielding 1.62%.

8. Blackstone Holdings Finance (USD) 2.8% 9/30/2050 144A (09/22/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.456, Yielding 2.83%.

9. Bank of America Corp. (USD) VAR% 9/25/2025 (09/22/2020): 2000MM Senior Unsecured Notes, Price at Issuance 100.

10. B.A.T. Capital Corp. (USD) 3.984% 9/25/2050 (09/22/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.98%.

Additional Commentary

NEW ISSUANCE WATCH: San Diego Gas & Electric Co. issued 800 MM in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Web.com Group Inc. (USD) TL2 L+775 09/17/2026
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Compass IV LTD (EUR) TL E+800 05/09/2026
Encapsys LLC (USD) TL L+350 11/07/2024
Deoleo SA (EUR) TL 06/24/2026
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Mavenir Inc. (USD) TLB L+600 05/08/2025
Wittur (EUR) TL E+850 09/19/2027

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 bp (basis points), as of 09/23/2020
  • Net positive capital flows into high-yield ETFs & mutual funds


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