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North American Bond Research – September 9, 2020

Posted on September 9, 2020
HIGH YIELD BOND RESEARCH
September 9, 2020
Bond Markets

MARKETS BOUNCE BACK AFTER THREE DAYS OF HEAVY LOSES. TESLA WAS UP 10% AFTER LOSING 21% YESTERDAY. INVESTORS WONDER IF THIS SLIDE IS OVER OR IS THIS A DEAD CAT BOUNCING? 10 Year Treasury notes were up 1.9 bps. S&P +2.01%, Dow +1.6%, NASDAQ +2.71%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 28 MILLION+ CASES AND 906000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.55 MILLION+ CASES AND 195000+ 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. 3.875% 4/15/2030 144A +0.1%
  Vale Overseas LTD 3.75% 7/8/2030 +0.0%
  Petrobras Global Finance BV 7.375% 1/17/2027 +1.8%
  Azul Investments LLP 5.875% 10/26/2024 Reg S +2.8%
  Petrobras Global Finance BV 6.85% 6/5/2115 +0.8%
–   Bahia SUL Hldgs Gmbh 5.75% 7/14/2026 -1.4%
  Petrobras Global Finance BV 8.75% 5/23/2026 -1.4%
  Goldman Sachs Group Inc. 5% PERP -0.0%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.1%
  Occidental Petroleum Corp. 3.5% 8/15/2029 -0.9%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Bahia SUL Hldgs Gmbh   5.75% 7/14/2026
Vale Overseas LTD   3.75% 7/8/2030
Petrobras Global Finance BV   7.375% 1/17/2027
Azul Investments LLP   5.875% 10/26/2024 Reg S
Petrobras Global Finance BV   6.85% 6/5/2115
Sally Hldg LLC   5.625% 12/1/2025
Micron Technology Inc.   5.327% 2/6/2029
Petrobras Global Finance BV   8.75% 5/23/2026
Goldman Sachs Group Inc.   5% PERP
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.03% 0.02% 0.35% 2.92% 4.73% 7.78%
Mining -0.32% -0.41% 2.61% 5.43% -8.63% -4.79%
Construction -0.07% -0.10% 0.63% 4.40% 4.60% 6.88%
Manufacturing -0.16% -0.34% -0.19% 3.01% 2.23% 5.97%
Transportion, Communication, Electric/Gas -0.14% -0.21% 53.69% 56.18% 59.14% 62.45%
Wholesale -0.13% 0.03% -1.07% 1.96% 1.22% 4.27%
Retail -0.11% -0.04% 0.92% 4.26% 2.45% 5.30%
Finance, Insurance, Real-Estate -0.10% -0.21% 0.87% 4.38% 1.82% 4.25%
Services -0.13% -0.16% 0.94% 2.80% 4.16% 5.48%
Public Administration -0.17% 0.44% 1.05% 6.13% 6.74% 9.34%
Energy -0.31% -0.35% 2.43% 4.55% -6.94% -3.39%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. TEGNA Inc. (USD) 4.75% 3/15/2026 144A (09/08/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

2. TEGNA Inc. (USD) 4.75% 3/15/2026 Reg S (09/08/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

3. CNX Resources Corp. (USD) 7.25% 3/14/2027 (09/08/2020): 200MM Senior Unsecured Notes, Price at Issuance 103.5, Yielding 6.58%.

4. NuStar Logistics LP (USD) 5.75% 10/1/2025 (09/09/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

5. NuStar Logistics LP (USD) 6.375% 10/1/2030 (09/09/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.38%.

1. MAG Aerospace: $290.7MM TL (B3/B)

2. RCN Grande: $1.19B TLB

3. Avianca : $1.3B DIP DD TLB

4. CJ Foods Inc.: $285MM TLB

5. MAG Aerospace: $290.7MM TL (B3/B)

6. CJ Foods Inc.: $285MM TLB

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

8. Avianca : $1.3B DIP DD TLB

9. MAG Aerospace: $290.7MM TL (B3/B)

10. Avianca : $1.3B DIP DD TLB

Additional Commentary

NEW ISSUANCE WATCH: TEGNA Inc. issued 550MM in notes
Top Widening Loans Top Narrowing Loans
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026
Wittur (EUR) TL E+850 09/19/2027
Valeo Foods Group LTD (EUR) TLB E+450 08/27/2027
Perstorp Hldg AB (USD) TLB L+475 04/05/2026
Ranpak Inc. (EUR) TL E+325 10/01/2021
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Aptean Inc. (USD) TL L+425 04/24/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Valeo Foods Group LTD (GBP) TL L+850 08/27/2028

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

 

INVESTMENT GRADE BOND RESEARCH
September 9, 2020
Bond Markets

MARKETS BOUNCE BACK AFTER THREE DAYS OF HEAVY LOSES. TESLA WAS UP 10% AFTER LOSING 21% YESTERDAY. INVESTORS WONDER IF THIS SLIDE IS OVER OR IS THIS A DEAD CAT BOUNCING? 10 Year Treasury notes were up 1.9 bps. S&P +2.01%, Dow +1.6%, NASDAQ +2.71%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 28 MILLION+ CASES AND 906000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.55 MILLION+ CASES AND 195000+ 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
+   Honeywell Intl. Inc. 0.483% 8/19/2022 +0.0%
  Eli Lilly & Co. 2.5% 9/15/2060 +0.2%
  Dupont de Nemours Inc. 2.169% 5/1/2023 +0.1%
  Valero Energy Corp. 2.85% 4/15/2025 +0.1%
  Regeneron Pharmaceuticals Inc. 1.75% 9/15/2030 +2.1%
–   Alphabet Inc. 2.25% 8/15/2060 -0.1%
  Dow Chemical Co. 3.6% 11/15/2050 -0.4%
  Noble Energy Inc. 5.05% 11/15/2044 -4.2%
  AT&T Inc. 3.5% 2/1/2061 -0.7%
  PayPal Hldg Inc. 2.65% 10/1/2026 -0.1%
Honeywell Intl. Inc.   0.483% 8/19/2022
Alphabet Inc.   2.25% 8/15/2060
Eli Lilly & Co.   2.5% 9/15/2060
Dupont de Nemours Inc.   2.169% 5/1/2023
Valero Energy Corp.   2.85% 4/15/2025
Regeneron Pharmaceuticals Inc.   1.75% 9/15/2030
Home Depot Inc.   2.7% 4/15/2030
Oracle Corp.   3.6% 4/1/2050
Oracle Corp.   3.85% 4/1/2060
Dow Chemical Co.   3.6% 11/15/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.01% -0.07% -0.90% 4.10% 5.83% 6.48%
Construction -0.02% 0.15% -0.74% 4.35% 6.00% 6.03%
Manufacturing 0.04% -0.09% -1.10% 3.03% 6.90% 7.56%
Transportion, Communication, Electric/Gas 0.01% 0.04% -1.65% 3.81% 8.44% 8.70%
Wholesale -0.01% 0.01% -0.56% 3.65% 6.79% 8.78%
Retail -0.08% -0.21% -1.91% 2.51% 8.03% 8.86%
Finance, Insurance, Real-Estate 0.05% -0.02% -0.39% 2.73% 6.03% 6.80%
Services 0.04% -0.08% -0.65% 3.38% 6.37% 6.82%
Public Administration -0.00% 0.01% 0.05% 0.56% 4.52% 4.11%
Energy -0.05% -0.10% -1.01% 3.25% 4.86% 5.82%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Kimberly-Clark Corp. (USD) 1.05% 9/15/2027 (09/08/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.05%.

2. Unilever Cap Corp. (USD) 1.375% 9/14/2030 (09/08/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.935, Yielding 1.38%.

3. Mitsubishi UFJ Financial Group Inc. (USD) VAR% 9/15/2024 (09/08/2020): 1500MM Senior Unsecured Notes, Price at Issuance 100.

4. Nestle Holdings Inc. (USD) 1.25% 9/15/2030 144A (09/08/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.216, Yielding 1.33%.

5. Arizona Public Service (USD) 2.65% 9/15/2050 (09/08/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.609, Yielding 2.67%.

6. Johnson Controls International PLC (USD) 1.75% 9/15/2030 (09/08/2020): 625MM Senior Unsecured Notes, Price at Issuance 99.689, Yielding 1.78%.

7. Nestle Holdings Inc. (USD) 1% 9/15/2027 144A (09/08/2020): 1100MM Senior Unsecured Notes, Price at Issuance 99.845, Yielding 1.02%.

8. Entergy Arkansas LLC (USD) 2.65% 6/15/2051 (09/08/2020): 675MM Secured Notes, Price at Issuance 99.605, Yielding 2.67%.

9. Unilever Cap Corp. (USD) 0.375% 9/14/2023 (09/08/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.872, Yielding .42%.

10. Valero Energy Corp. (USD) 2.15% 9/15/2027 (09/08/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.87, Yielding 2.17%.

Additional Commentary

NEW ISSUANCE WATCH:  Kimberly-Clark Corp. issued 600MM in notes.
Top Widening Loans Top Narrowing Loans
TMF Group Hldg B.V. (EUR) TL2 E+687.5 06/08/2026
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026
Wittur (EUR) TL E+850 09/19/2027
Valeo Foods Group LTD (EUR) TLB E+450 08/27/2027
Perstorp Hldg AB (USD) TLB L+475 04/05/2026
Ranpak Inc. (EUR) TL E+325 10/01/2021
BCA Marketplace PLC (GBP) TL L+825 09/04/2027
Aptean Inc. (USD) TL L+425 04/24/2026
Distributed Power Inc. (USD) TLB L+325 11/02/2025
Valeo Foods Group LTD (GBP) TL L+850 08/27/2028

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

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