High Yield Bond Research - June 14, 2019

Posted by Corey Mahoney on Jun 14, 2019 5:05:40 PM
STOCKS INITIALLY FELL ON FRIDAY following weak industrial growth from China surprising investors reporting a 17-year low. “The China data certainly is far-reaching, impacting not only China but global markets as well.” Investors will keep a keen eye on the Feds meeting next week speculating on a rate cut. The 10-year note lost 0.1 basis points. Equities recovered in the afternoon from China's disappointing data, S&P +0.03%, DOW +0.14, NASDAQ -0.28%.
 
STRONG RETAIL SALES drove the economy higher as sales rose 0.5 percent in May reassuring investors the economy is on solid ground.  Consumer spending accounts for more than two-thirds of the economy, in addition, the service sector represents 88 percent of GDP “All the indications continue to be really strong in terms of unemployment, customer confidence” US industrial production bounced back in May rising 0.4 percent.  ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds. High-grade edged out high-yield.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Xerox Corp. (USD) 4.8% 3/1/2035 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Corey Mahoney (cmahoney@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   HCA Inc. 5% 3/15/2024 + 0.2%
  Petrobras Global Finance BV 8.75% 5/23/2026 + 0.8%
-   H&E Equipment Services Inc. 5.625% 9/1/2025 -0.3%
Frontier Communications Corp.   8.75% 4/15/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.27% 1.29% 2.49% 4.61% 10.10% 12.74%
Mining -0.03% 0.13% -1.98% -0.43% 6.56% 1.22%
Construction -0.07% 0.61% 1.37% 3.85% 8.90% 6.60%
Manufacturing 0.06% 0.63% 0.56% 1.82% 7.72% 5.92%
Transportion, Communication, Electric/Gas 0.06% 0.39% 1.57% 3.26% 8.79% 7.67%
Wholesale 0.03% 0.71% 1.10% 2.47% 9.18% 5.73%
Retail 0.02% 0.69% 1.21% 4.49% 11.20% 8.07%
Finance, Insurance, Real-Estate 0.02% 0.60% 1.11% 2.68% 8.85% 8.07%
Services 0.03% 0.68% 1.48% 2.82% 9.10% 7.98%
Public Administration 0.12% 0.74% 1.47% 2.86% 8.34% 13.85%
Energy -0.01% 0.11% -1.94% -0.42% 6.30% 0.89%
 
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-14T170420.091

New Issues Forward Calendar

1. Harsco Corp. (USD) 5.75% 7/31/2027 Reg S (06/13/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

2. Bcpe Cycle Merger Sub II, Inc. (USD) 10.625% 7/15/2027 144A (06/14/2019): 505MM Senior Unsecured Notes, Price at Issuance 100, Yielding 10.63%.

1. Nexstar Media Group Inc.: Possible new bonds, Expected Q3 2019

2. Diamondback Energy Inc.: High-yield notes, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/13/19 participants welcome a $500MM new corporate-bond offering by Harsco Corp.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 6/7/19, with a net outflow of $3.2B, year-to-date $6.6B flowed into high-yield.
 
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
Road King Infrastructure LTD (5Y Sen USD MR14)
Cable & Wireless Communication (5Y Sen USD CR14)

unnamed - 2019-06-05T084255.682

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, 
notable secondary activity: 
  • Perforce Software Inc., Avantor Performance Materials Inc., United PF Holdings LLC
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 24 bp (basis points), as of 06/14/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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Topics: Investment Grade, Loans, Analytics, bonds, junk bonds, bond market, market analytics, New Issues, News, Syndicated Bonds, syndicated, research, market update


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