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North American Bond Research – September 29, 2020

Posted on September 29, 2020
HIGH YIELD BOND RESEARCH
September 29, 2020
Bond Markets

GLOBAL MARKETS DOWN AS THEY AWAIT WHAT SIZE IS THE STIMULUS PACKAGE GOING TO BE? THE DEMOCRATS PASSED A $2.2 TRILLION PACKAGE WHILE THE REPUBLICAN HOLD ON TO A TRILLION DOLLAR PACKAGE. 10 Year Treasury notes were down 1.8 bps. S&P -0.48%, Dow -0.48%, NASDAQ -0.29%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 33.75 MILLION+ CASES AND 1.01 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.4 MILLION+ CASES AND 210000+ 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
+   Centene Corp. 3% 10/15/2030 +0.1%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.2%
  Broadcom LTD 4.7% 4/15/2025 +0.0%
  HCA Inc. 3.5% 9/1/2030 +0.2%
  Ford Motor Co. 8.5% 4/21/2023 +0.5%
–   Petrobras Global Finance BV 6.85% 6/5/2115 -2.4%
  WPX Energy Inc. 4.5% 1/15/2030 -0.3%
  Newfield Exploration Co. 5.375% 1/1/2026 -0.3%
  Howmet Aerospace Inc. 6.875% 5/1/2025 -0.4%
  Sprint Nextel Corp. 7.875% 9/15/2023 -0.0%
Centene Corp.   3% 10/15/2030
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Petrobras Global Finance BV   6.85% 6/5/2115
Broadcom LTD   4.7% 4/15/2025
WPX Energy Inc.   4.5% 1/15/2030
Newfield Exploration Co.   5.375% 1/1/2026
HCA Inc.   3.5% 9/1/2030
Howmet Aerospace Inc.   6.875% 5/1/2025
Ford Motor Co.   8.5% 4/21/2023
Sprint Nextel Corp.   7.875% 9/15/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.03% -0.71% -0.83% 3.52% 4.64% 7.28%
Mining 0.10% -2.07% -3.85% 2.71% -12.67% -10.38%
Construction 0.05% -0.23% 0.24% 5.15% 4.87% 7.28%
Manufacturing 0.08% -0.69% -0.75% 3.89% 1.67% 5.52%
Transportion, Communication, Electric/Gas 0.02% -0.78% -0.97% 2.53% 2.87% 5.01%
Wholesale 0.01% -0.51% -0.33% 2.51% 1.60% 4.28%
Retail 0.07% -0.66% -0.03% 6.47% 1.42% 4.18%
Finance, Insurance, Real-Estate 0.07% -0.58% -0.40% 3.64% 1.05% 3.53%
Services 0.06% -0.84% -0.94% 3.88% 3.48% 4.44%
Public Administration 0.02% -0.55% 0.46% 5.57% 6.72% 9.81%
Energy 0.05% -2.24% -4.14% 2.17% -10.91% -8.30%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 09/29/2020)
1. Vander-Bend Manufacturing Inc.: $197.5MM credit facilities: $20MM revolver; $177.5MM TLB

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

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

4. Canada Goose Inc.: $300MM TLB (B2/BB)

5. Global Medical Response: $1.5B TL (B1/B)

6. Alera Group: $300MM TLB (B2)

7. Vistra: $573MM TLB

8. Alera Group: $300MM TLB (B2)

9. American Residential Services: $470MM TLB

10. Global Medical Response: $1.5B TL (B1/B)

Additional Commentary

NEW ISSUANCE WATCH:   No New Issues.
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
Archroma Global Services (USD) TLB2 L+425 07/11/2024
American Airlines Inc. (USD) TLB L+200 12/14/2023
Juice Plus+ (USD) TL L+550 11/20/2025
CPV Shore LLC (USD) TLB L+375 12/27/2025
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
TCW Group (USD) TLB L+175 12/27/2024
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
Vertafore Inc. (USD) TL2 L+725 07/02/2026
Kindercare Education LLC (USD) TL L+825 08/16/2025

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 13 bp (basis points), as of 09/29/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 29, 2020
Bond Markets

GLOBAL MARKETS DOWN AS THEY AWAIT WHAT SIZE IS THE STIMULUS PACKAGE GOING TO BE? THE DEMOCRATS PASSED A $2.2 TRILLION PACKAGE WHILE THE REPUBLICAN HOLD ON TO A TRILLION DOLLAR PACKAGE. 10 Year Treasury notes were down 1.8 bps. S&P -0.48%, Dow -0.48%, NASDAQ -0.29%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 33.75 MILLION+ CASES AND 1.01 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.4 MILLION+ CASES AND 210000+ 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
+   Coca-Cola Co. 2.6% 6/1/2050 +0.7%
  Boeing Co. 5.15% 5/1/2030 +0.0%
  Gilead Sciences Inc. 0.75% 9/29/2023 +0.0%
  TJX Cos. Inc. 3.75% 4/15/2027 +0.0%
  Boeing Co. 5.805% 5/1/2050 +0.6%
–   Gilead Sciences Inc. 2.6% 10/1/2040 -0.0%
  Microsoft Corp. 1.55% 8/8/2021 (1) -0.3%
  Shell Intl Finance BV 0.375% 9/15/2023 -0.0%
  Oracle Corp. 3.6% 4/1/2040 -0.0%
  AT&T Inc. 4.3% 2/15/2030 -0.3%
Gilead Sciences Inc.   2.6% 10/1/2040
Microsoft Corp.   1.55% 8/8/2021 (1)
Coca-Cola Co.   2.6% 6/1/2050
Boeing Co.   5.15% 5/1/2030
Gilead Sciences Inc.   0.75% 9/29/2023
TJX Cos. Inc.   3.75% 4/15/2027
Boeing Co.   5.805% 5/1/2050
Southern Co.   4% 1/15/2051
AT&T Inc.   3.4% 5/15/2025
Shell Intl Finance BV   0.375% 9/15/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.13% -0.66% -0.43% 2.79% 5.07% 6.09%
Construction 0.06% 0.10% 1.50% 3.67% 5.99% 6.94%
Manufacturing -0.09% -0.34% 0.23% 1.96% 7.02% 8.08%
Transportion, Communication, Electric/Gas -0.20% -0.44% 0.23% 2.13% 8.22% 9.20%
Wholesale -0.12% -0.37% 0.36% 2.50% 6.81% 8.82%
Retail -0.10% -0.42% 0.31% 1.37% 8.06% 9.59%
Finance, Insurance, Real-Estate -0.09% -0.31% 0.03% 1.55% 5.86% 7.13%
Services -0.07% -0.32% 0.27% 2.03% 6.63% 7.57%
Public Administration -0.27% -0.22% -0.01% 0.35% 4.87% 4.65%
Energy -0.18% -0.80% -0.66% 1.93% 3.87% 5.28%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. ANB Corp. (USD) VAR% 9/30/2030 (09/28/2020): 70MM Subordinated Notes, Price at Issuance 100.

2. PPL Electric Utilities Corp. (USD) FLT% 9/28/2023 (09/28/2020): 250MM First Lien Notes, Price at Issuance 100.

3. Southern California Edison Co. (USD) 1.2% 2/1/2026 (09/28/2020): 350MM First Lien Notes, Price at Issuance 99.81, Yielding 1.24%.

4. GlaxoSmithKline Capital PLC (USD) 0.534% 10/1/2023 (09/28/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding .53%.

5. Pernod Ricard Intl. Finance LLC (USD) 2.75% 10/1/2050 144A (09/28/2020): 500MM Senior Unsecured Notes, Price at Issuance 97.4, Yielding 2.88%.

6. Pernod Ricard Intl. Finance LLC (USD) 1.625% 4/1/2031 144A (09/28/2020): 900MM Senior Unsecured Notes, Price at Issuance 99.158, Yielding 1.71%.

7. Pernod Ricard Intl. Finance LLC (USD) 1.25% 4/1/2028 144A (09/28/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.594, Yielding 1.31%.

8. Pernod Ricard Intl. Finance LLC (USD) 2.75% 10/1/2050 Reg S (09/28/2020): 500MM Senior Unsecured Notes, Price at Issuance 97.4, Yielding 2.88%.

9. Pernod Ricard Intl. Finance LLC (USD) 1.625% 4/1/2031 Reg S (09/28/2020): 900MM Senior Unsecured Notes, Price at Issuance 99.158, Yielding 1.71%.

10. Pernod Ricard Intl. Finance LLC (USD) 1.25% 4/1/2028 Reg S (09/28/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.594, Yielding 1.31%.

Additional Commentary

NEW ISSUANCE WATCH: Pernod Ricard Intl. Finance LLC  issued 3500MM in notes.
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
Archroma Global Services (USD) TLB2 L+425 07/11/2024
American Airlines Inc. (USD) TLB L+200 12/14/2023
Juice Plus+ (USD) TL L+550 11/20/2025
CPV Shore LLC (USD) TLB L+375 12/27/2025
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
TCW Group (USD) TLB L+175 12/27/2024
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
Vertafore Inc. (USD) TL2 L+725 07/02/2026
Kindercare Education LLC (USD) TL L+825 08/16/2025

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 13 bp (basis points), as of 09/29/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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