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North American Bond Research – September 8, 2020

Posted on September 8, 2020
HIGH YIELD BOND RESEARCH
September 8, 2020
Bond Markets

BAD THINGS SEEM TO HAPPEN IN THREE’S. THE MARKETS FELL FOR THE THIRD DAY AS TECH STOCKS, THAT WERE ONCE HIGH FLYING, CAME CRASHING BACK TO EARTH. TESLA STOCK LOST 21% OF ITS MARKET CAP. 10 Year Treasury notes were down 3.7 bps. S&P -2.79%, Dow -2.25%, NASDAQ -4.11%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 27.7 MILLION+ CASES AND 900000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.5 MILLION+ CASES AND 194000+ 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
+   Micron Technology Inc. 4.663% 2/15/2030 +0.9%
  Sprint Nextel Corp. 7.875% 9/15/2023 +0.1%
  Lennar Corp. 2.95% 11/29/2020 +0.2%
  Consol Energy Inc. 5.875% 4/15/2022 (1) +0.3%
  General Motors Co. 5.2% 4/1/2045 +1.4%
–   Petrobras Global Finance BV 6.85% 6/5/2115 -1.3%
  Charter Communications Operating LLC 4.8% 3/1/2050 -0.5%
  Cenovus Energy Inc. 5.375% 7/15/2025 -1.5%
  Freeport-McMoRan Inc. 4.625% 8/1/2030 -0.1%
  Cheniere Corpus Christi Hldgs LLC 5.125% 6/30/2027 -0.1%
Micron Technology Inc.   4.663% 2/15/2030
Sprint Nextel Corp.   7.875% 9/15/2023
Petrobras Global Finance BV   6.85% 6/5/2115
Charter Communications Operating LLC   4.8% 3/1/2050
Cenovus Energy Inc.   5.375% 7/15/2025
Freeport-McMoRan Inc.   4.625% 8/1/2030
Cheniere Corpus Christi Hldgs LLC   5.125% 6/30/2027
Broadcom LTD   4.7% 4/15/2025
QVC Inc.   4.375% 9/1/2028
Lennar Corp.   2.95% 11/29/2020
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.22% 0.22% 0.76% 4.17% 5.77% 8.98%
Mining -0.27% 0.38% 1.48% 9.91% -8.09% -3.87%
Construction -0.20% 0.21% 0.91% 5.47% 4.63% 7.03%
Manufacturing -0.26% 0.06% 0.40% 4.58% 2.59% 6.48%
Transportion, Communication, Electric/Gas -0.30% 0.21% 58.15% 61.12% 62.86% 66.53%
Wholesale -0.17% 0.29% 0.23% 4.48% 2.77% 5.75%
Retail -0.28% 0.35% 1.35% 6.04% 1.71% 4.96%
Finance, Insurance, Real-Estate -0.23% 0.24% 1.94% 6.38% 2.09% 4.69%
Services -0.28% 0.29% 1.25% 3.72% 4.21% 5.76%
Public Administration -0.24% 0.25% 1.74% 7.12% 6.46% 9.02%
Energy -0.31% 0.39% 1.50% 8.86% -6.14% -2.27%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 09/08/2020)
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
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Deoleo SA (EUR) TL 06/24/2026
OVH Groupe (EUR) TLB E+325 11/29/2026
Casper Bidco (EUR) TL E+850 07/30/2027
Nets Hldgs AS (EUR) TL E+700 02/06/2027
EG Group (EUR) TL E+775 03/23/2026
Unifrax Corp. (USD) TLB L+375 12/14/2025
24 Hour Fitness Worldwide Inc. (USD) DIP DD L+1000 06/15/2021
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022

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 09/08/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 8, 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 down 3.7 bps. S&P -0.76%, Dow -0.52%, NASDAQ -1.21%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 27.7 MILLION+ CASES AND 900000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.5 MILLION+ CASES AND 194000+ 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
+   CVS Health Corp. 4.3% 3/25/2028 +0.4%
  Verizon Communications Inc. 4.125% 3/16/2027 +0.0%
  Anheuser-Busch Inbev Worldwide Inc. 4.5% 6/1/2050 +0.4%
  Vodafone Group PLC 2.95% 2/19/2023 +0.0%
  Alphabet Inc. 2.25% 8/15/2060 +0.3%
–   CVS Health Corp. 1.75% 8/21/2030 -0.7%
  Goldman Sachs Group Inc. 3.85% 1/26/2027 -0.2%
  CVS Health Corp. 3.7% 3/9/2023 -0.3%
  Boeing Co. 5.805% 5/1/2050 -0.3%
  Fortive Corp. 0.875% 2/15/2022 -0.6%
CVS Health Corp.   1.75% 8/21/2030
Goldman Sachs Group Inc.   3.85% 1/26/2027
CVS Health Corp.   3.7% 3/9/2023
CVS Health Corp.   4.3% 3/25/2028
Boeing Co.   5.805% 5/1/2050
Fortive Corp.   0.875% 2/15/2022
Takeda Pharmaceutical Co. LTD   2.05% 3/31/2030
General Electric Co.   4.35% 5/1/2050
Verizon Communications Inc.   4.125% 3/16/2027
Valero Energy Corp.   2.85% 4/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.59% 0.24% -0.38% 5.10% 5.74% 6.03%
Construction -0.40% 0.43% -0.35% 4.85% 5.40% 5.02%
Manufacturing -0.48% 0.27% -0.95% 3.36% 6.93% 7.07%
Transportion, Communication, Electric/Gas -0.55% 0.52% -1.36% 4.29% 8.46% 8.20%
Wholesale -0.33% 0.36% -0.25% 4.35% 6.57% 8.20%
Retail -0.54% 0.42% -1.33% 3.09% 7.78% 8.10%
Finance, Insurance, Real-Estate -0.31% 0.17% -0.25% 2.99% 5.81% 6.31%
Services -0.46% 0.34% -0.67% 3.75% 6.57% 6.62%
Public Administration -0.04% -0.06% -0.28% 0.44% 4.52% 3.60%
Energy -0.55% 0.34% -0.40% 4.35% 4.92% 5.51%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

(None Current 09/08/2020)
Additional Commentary

NEW ISSUANCE WATCH:  No new Issues.
Top Widening Loans Top Narrowing Loans
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Deoleo SA (EUR) TL 06/24/2026
OVH Groupe (EUR) TLB E+325 11/29/2026
Casper Bidco (EUR) TL E+850 07/30/2027
Nets Hldgs AS (EUR) TL E+700 02/06/2027
EG Group (EUR) TL E+775 03/23/2026
Unifrax Corp. (USD) TLB L+375 12/14/2025
24 Hour Fitness Worldwide Inc. (USD) DIP DD L+1000 06/15/2021
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Philadelphia Energy Solutions (USD) TL L+800 02/11/2022

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 09/08/2020
  • Net positive capital flows into high-yield ETFs & mutual funds


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