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North American Bond Research – September 4, 2020

Posted on September 4, 2020
HIGH YIELD BOND RESEARCH
September 4, 2020
Bond Markets

MARKETS DOWN AS US UNEMPLOYMENT RATE FELL TO 8.4% AS THE US ADDED 1.4 MILLION JOBS. AUGUST EMPLOYMENT IS STILL 11.5 MILLION JOBS LESS THAN FEBRUARY JOB FIGURES. LABOR PARTICIPATION IS STILL BELOW CONSENSUS. U6 EMPLOYMENT FIGURES PAINT A 14.6% UNEMPLOYMENT RATE, UNDERSCORING MAIN STREETS TROUBLES. 10 Year Treasury notes were up 9.9 bps. S&P -0.76%, Dow -0.52%, NASDAQ -1.21%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 26.7 MILLION+ CASES AND 877000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.4 MILLION+ CASES AND 192000+ 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
+   Teva Pharmaceutical Industries LTD 2.2% 7/21/2021 +0.6%
  Telecom Italia Capital SA 6% 9/30/2034 +0.3%
  Citigroup Inc. 6.125% PERP +0.0%
  Petrobras Global Finance BV 8.75% 5/23/2026 +0.5%
  Hilton Domestic Operating Co. 5.125% 5/1/2026 +0.3%
–   Macy’s Retail Hldg Inc. 4.375% 9/1/2023 -0.3%
  L Brands Inc. 7.5% 6/15/2029 -1.2%
  Pacific Gas & Electric Co. 4% 12/1/2046 -1.5%
  BAC Cap Trust X 5.63% 3/15/2043 -1.2%
  General Motors Co. 6.25% 10/2/2043 -3.3%
Macy’s Retail Hldg Inc.   4.375% 9/1/2023
L Brands Inc.   7.5% 6/15/2029
Pacific Gas & Electric Co.   4% 12/1/2046
BAC Cap Trust X   5.63% 3/15/2043
Centene Corp.   3.375% 2/15/2030
General Motors Co.   6.25% 10/2/2043
Teva Pharmaceutical Industries LTD   2.2% 7/21/2021
Telecom Italia Capital SA   6% 9/30/2034
Kraft Heinz Co.   4.375% 6/1/2046 (2)
Citigroup Inc.   6.125% PERP
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.11% 0.41% 0.99% 4.96% 5.98% 9.33%
Mining 0.28% 0.45% 2.03% 10.70% -7.44% -3.01%
Construction 0.05% 0.30% 0.97% 6.11% 5.07% 7.76%
Manufacturing 0.03% 0.26% 0.82% 5.03% 3.02% 6.76%
Transportion, Communication, Electric/Gas 0.09% 0.42% 57.83% 61.02% 62.92% 66.63%
Wholesale 0.15% 0.31% -0.59% 3.20% 0.61% 3.58%
Retail 0.22% 0.50% 1.37% 6.07% 2.70% 6.03%
Finance, Insurance, Real-Estate 0.05% 0.34% 1.93% 6.56% 1.79% 4.55%
Services 0.09% 0.35% 1.49% 4.24% 4.19% 5.86%
Public Administration 0.21% 0.51% 2.40% 8.52% 6.72% 9.30%
Energy 0.26% 0.55% 1.87% 9.39% -6.13% -2.10%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 09/04/2020)
1. Avianca : $1.3B DIP DD TLB

2. MAG Aerospace: $290.7MM TL (B3/B)

3. CJ Foods Inc.: $285MM TLB

4. Milano Acquisition Corp.: $3.2B of term loans: $2.4B covenant-lite TLB (B2/B+); $800MM privately placed TL

5. MAG Aerospace: $290.7MM TL (B3/B)

6. CJ Foods Inc.: $285MM TLB

7. Avianca : $1.3B DIP DD 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: No New Issues.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
CPM Holdings Inc. (USD) TL2 L+825 11/16/2026
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Deoleo SA (EUR) TL 06/24/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
StandardAero (USD) TL L+350 04/08/2026
Ball Corp. (USD) TLA L+150 03/21/2024
Stubhub (USD) TLB L+350 02/13/2027

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 15 bp (basis points), as of 09/04/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 4, 2020
Bond Markets

MARKETS DOWN AS US UNEMPLOYMENT RATE FELL TO 8.4% AS THE US ADDED 1.4 MILLION JOBS. AUGUST EMPLOYMENT IS STILL 11.5 MILLION JOBS LESS THAN FEBRUARY JOB FIGURES. LABOR PARTICIPATION IS STILL BELOW CONSENSUS. U6 EMPLOYMENT FIGURES PAINT A 14.6% UNEMPLOYMENT RATE, UNDERSCORING MAIN STREETS TROUBLES. 10 Year Treasury notes were up 9.9 bps. S&P -0.76%, Dow -0.52%, NASDAQ -1.21%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 26.7 MILLION+ CASES AND 877000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.4 MILLION+ CASES AND 192000+ 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
+   Boeing Co. 5.15% 5/1/2030 +0.6%
  Nordstrom Inc. 5% 1/15/2044 +0.5%
  Boeing Co. 3.25% 3/1/2028 +2.3%
  Philip Morris Intl. Inc. 2.625% 2/18/2022 +0.1%
  Walt Disney Co. FLT% 3/4/2022 +0.2%
–   CVS Health Corp. 5.05% 3/25/2048 -2.7%
  Exxon Mobil Corp. 1.571% 4/15/2023 -0.2%
  Lennox Intl Inc. 1.35% 8/1/2025 -0.3%
  Lloyds Banking Group PLC 2.858% 3/17/2023 -0.0%
  JP Morgan Chase & Co. 4.6% PERP -0.7%
CVS Health Corp.   5.05% 3/25/2048
Exxon Mobil Corp.   1.571% 4/15/2023
Lloyds Banking Group PLC   2.858% 3/17/2023
JP Morgan Chase & Co.   4.6% PERP
Prudential Financial Inc.   3.935% 12/7/2049
Roper Technologies Inc.   1% 9/15/2025
Bank of America Corp.   1.898% 7/23/2031
AT&T Inc.   3.5% 2/1/2061
Boeing Co.   5.15% 5/1/2030
AT&T Inc.   5.7% 3/1/2057
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.46% 0.70% 0.26% 5.53% 6.32% 6.70%
Construction 0.76% 0.93% 0.50% 5.62% 6.36% 5.90%
Manufacturing 0.31% 0.47% -0.33% 3.53% 7.05% 7.25%
Transportion, Communication, Electric/Gas 0.69% 0.80% -0.70% 4.59% 8.84% 8.52%
Wholesale 0.32% 0.53% 0.18% 4.62% 6.79% 8.20%
Retail 0.39% 0.72% -0.78% 3.25% 8.13% 8.69%
Finance, Insurance, Real-Estate 0.16% 0.32% 0.11% 3.15% 5.86% 6.44%
Services 0.33% 0.58% -0.12% 4.02% 6.70% 6.77%
Public Administration 0.03% -0.06% 0.03% 0.36% 4.37% 3.90%
Energy 0.48% 0.72% 0.30% 4.90% 5.39% 6.09%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. ECN Capital Corp. (CAD) 6% 12/31/2035 (09/03/2020): 75MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.
Additional Commentary

NEW ISSUANCE WATCH:  ECN Capital Corp.  75MM issued in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Wynn Resorts LTD. (USD) TL L+170 07/24/2025
CPM Holdings Inc. (USD) TL2 L+825 11/16/2026
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Deoleo SA (EUR) TL 06/24/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
StandardAero (USD) TL L+350 04/08/2026
Ball Corp. (USD) TLA L+150 03/21/2024
Stubhub (USD) TLB L+350 02/13/2027

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 15 bp (basis points), as of 09/04/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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