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North American Bond Research – September 3, 2020

Posted on September 3, 2020
HIGH YIELD BOND RESEARCH
September 3, 2020
Bond Markets

880K+ WORKERS FILED FOR FIRST TIME UNEMPLOYMENT. AFTER HITTING RECORDS HIGHS YESTERDAY, MARKETS FALL LIKE A BRICK! IS WALL STREET FINALLY STARTING TO RECONCILE WITH MAIN STREET? 10 Year Treasury notes were down 2.9 bps. S&P -3.51%, Dow -2.78%, NASDAQ -4.97%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 26.3 MILLION+ CASES AND 871000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.3 MILLION+ CASES AND 191000+ 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
+   T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.3%
  BAC Cap Trust X 5.63% 3/15/2043 +1.2%
  Broadcom LTD 4.7% 4/15/2025 +0.1%
  Xerox Corp. 3.625% 3/15/2023 +0.3%
  Macy’s Retail Hldg Inc. 4.375% 9/1/2023 +2.1%
–   Petrobras Global Finance BV 7.375% 1/17/2027 -0.5%
  AES Corp. 6% 5/15/2026 -0.0%
  Citigroup Inc. 5.95% PERP (1) -1.6%
  Broadcom LTD 4.25% 4/15/2026 -0.4%
  Intl Lease Finance Corp. 8.625% 1/15/2022 -2.3%
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Petrobras Global Finance BV   7.375% 1/17/2027
BAC Cap Trust X   5.63% 3/15/2043
Intl Lease Finance Corp.   8.625% 1/15/2022
Broadcom LTD   4.7% 4/15/2025
Xerox Corp.   3.625% 3/15/2023
AES Corp.   6% 5/15/2026
Macy’s Retail Hldg Inc.   4.375% 9/1/2023
Cemex Finance LLC   6% 4/1/2024 Reg S
L Brands Inc.   5.25% 2/1/2028
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -3.22% 0.36% 245.42% 265.14% 272.59% 283.12%
Mining -3.34% -0.09% 72.97% 92.60% 51.89% 53.07%
Construction -2.42% 0.40% 145.04% 158.95% 157.20% 163.03%
Manufacturing -9.49% 0.44% 70.83% 78.68% 70.34% 67.91%
Transportion, Communication, Electric/Gas -15.15% 0.60% 101.06% 107.21% 108.04% 103.70%
Wholesale -2.86% 0.28% 92.16% 98.93% 96.41% 101.60%
Retail -12.08% 0.56% 145.75% 157.65% 151.23% 110.12%
Finance, Insurance, Real-Estate -3.28% 0.50% 86.50% 94.78% 88.55% 68.77%
Services -32.14% 0.60% 88.74% 95.37% 93.81% 86.68%
Public Administration 0.31% 0.99% 3.00% 9.17% 7.01% 9.61%
Energy -4.82% 0.29% 99.17% 117.12% 81.42% 78.77%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Spirit Loyalty Cayman LTD Spirit Ip Cayman LTD (USD) 8% 9/20/2025 144A (09/02/2020): 850MM First Lien Notes, Price at Issuance 98.976, Yielding 8.25%.

2. Spirit Loyalty Cayman LTD Spirit Ip Cayman LTD (USD) 8% 9/20/2025 Reg S (09/02/2020): 850MM First Lien Notes, Price at Issuance 98.976, Yielding 8.25%.

1. Avianca : $1.3B DIP DD TLB

2. MAG Aerospace: $290.7MM TL (B3/B)

3. CJ Foods Inc.: $285MM TLB

4. Avianca : $1.3B DIP DD TLB

5. MAG Aerospace: $290.7MM TL (B3/B)

6. CJ Foods Inc.: $285MM TLB

7. Metronet : $100MM TLB

8. Avianca : $1.3B DIP DD TLB

9. MAG Aerospace: $290.7MM TL (B3/B)

10. CJ Foods Inc.: $285MM TLB

Additional Commentary

NEW ISSUANCE WATCH: Spirit Loyalty Cayman LTD issued 850MM in notes.
Top Widening Loans Top Narrowing Loans
Vacalians Holding SAS (EUR) TLB E+400 10/30/2025
Laird PLC (USD) TL L+450 05/04/2025
United Site Services Inc (USD) TL2 L+775 08/25/2025
Casper Bidco (EUR) TL E+850 07/30/2027
Philadelphia Energy Solutions (USD) TLA L+625 12/31/2022
Stena International SA (USD) TLB L+300 03/03/2021
Tacala LLC (USD) TLB L+350 02/05/2027
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Unifrax Corp. (USD) TLB L+375 12/14/2025

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 15 bp (basis points), as of 09/03/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 3, 2020
Bond Markets

880K+ WORKERS FILED FOR FIRST TIME UNEMPLOYMENT. AFTER HITTING RECORDS HIGHS YESTERDAY, MARKETS FALL LIKE A BRICK! IS WALL STREET FINALLY STARTING TO RECONCILE WITH MAIN STREET? 10 Year Treasury notes were down 2.9 bps. S&P -3.51%, Dow -2.78%, NASDAQ -4.97%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 26.3 MILLION+ CASES AND 871000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.3 MILLION+ CASES AND 191000+ 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 New York Mellon Corp. VAR% PERP +0.4%
  Magna Intl Inc. 3.625% 6/15/2024 +0.1%
  Simon Property Group Inc. 2.65% 7/15/2030 +0.5%
  Visa Inc. 2.05% 4/15/2030 +0.0%
  Boeing Co. 5.805% 5/1/2050 +0.2%
–   Banner Health 2.338% 1/1/2030 -0.8%
  Block Financial LLC 3.875% 8/15/2030 -0.0%
  Lennox Intl Inc. 1.35% 8/1/2025 -0.3%
  CVS Health Corp. 4.3% 3/25/2028 -0.2%
  Walgreens Boots Alliance Inc. 4.1% 4/15/2050 -2.6%
Bank of New York Mellon Corp.   VAR% PERP
Banner Health   2.338% 1/1/2030
Block Financial LLC   3.875% 8/15/2030
Lennox Intl Inc.   1.35% 8/1/2025
Magna Intl Inc.   3.625% 6/15/2024
CVS Health Corp.   4.3% 3/25/2028
Simon Property Group Inc.   2.65% 7/15/2030
Walgreens Boots Alliance Inc.   4.1% 4/15/2050
Anheuser-Busch Inbev Worldwide Inc.   5.55% 1/23/2049
Nvidia Corp.   3.5% 4/1/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.37% 0.36% 0.04% 6.02% 6.29% 6.76%
Construction 0.36% 0.31% 0.07% 5.68% 6.78% 6.65%
Manufacturing 0.32% 0.34% -0.11% 4.46% 7.70% 7.83%
Transportion, Communication, Electric/Gas 0.50% 0.36% -1.19% 4.55% 9.06% 8.83%
Wholesale 0.20% 0.33% 0.03% 4.94% 6.94% 8.54%
Retail 0.32% 0.40% -1.11% 3.30% 8.52% 9.24%
Finance, Insurance, Real-Estate 0.20% 0.25% -0.09% 3.63% 6.39% 6.97%
Services 0.34% 0.46% -0.51% 4.17% 7.27% 7.33%
Public Administration 0.03% 0.11% 0.01% 0.53% 4.80% 4.07%
Energy 0.42% 0.43% -0.04% 5.27% 5.26% 6.03%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Mizuho Securities USA Inc. (USD) FLT% 9/27/2021 (09/02/2020): 75MM Senior Unsecured Notes, Price at Issuance 100.

2. Mondelez International Inc. (USD) 1.5% 2/4/2031 (09/02/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.302, Yielding 1.57%.

3. Mondelez International Inc. (USD) 2.625% 9/4/2050 (09/02/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.444, Yielding 2.65%.

4. Northwest Bancshares Inc. (USD) VAR% 9/15/2030 (09/02/2020): 125MM Subordinated Notes, Price at Issuance 100.

5. John Deere Financial LTD (CAD) 1.34% 9/8/2027 (09/02/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.98, Yielding 1.34%.

Additional Commentary

NEW ISSUANCE WATCH:  Mizuho Securities USA Inc.  75MM issued in notes.
Top Widening Loans Top Narrowing Loans
Vacalians Holding SAS (EUR) TLB E+400 10/30/2025
Laird PLC (USD) TL L+450 05/04/2025
United Site Services Inc (USD) TL2 L+775 08/25/2025
Casper Bidco (EUR) TL E+850 07/30/2027
Philadelphia Energy Solutions (USD) TLA L+625 12/31/2022
Stena International SA (USD) TLB L+300 03/03/2021
Tacala LLC (USD) TLB L+350 02/05/2027
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
DTZ US Borrower LLC (USD) TLB L+275 08/21/2025
Unifrax Corp. (USD) TLB L+375 12/14/2025

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 15 bp (basis points), as of 09/03/2020
  • Net positive capital flows into high-yield ETFs & mutual funds


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