High Yield Bond Research - March 12, 2019

Posted by Corey Mahoney on Mar 12, 2019 5:12:26 PM
HUMBLE INFLATION DATA released on Tuesday affirms the Feds “patient” stance on interest rate hikes. The Consumer Price Index edged up 0.1 percent excluding food and energy, marking the smallest increase since late August of 2018.  “We view the risks to the inflation outlook as weighted to the downside as the domestic economy has slowed more quickly than we had expected,” Senior Economist at Moody’s.  The 10-year U.S. Treasury note dipped 4 basis points and the 30-year note sank 3.7 basis points.  S&P +0.33%, Dow -0.34%, NASDAQ +0.47%  
 
 
CORE CPI ROSE A MARGINAL 0.2 PERCENT IN FEBRUARY aided by a significant 1.1 percent increase in apparel and gas prices advancing 1.5 percent.  Treasuries continue to rally sending yields lower as “market participants are shifting to a more dovish outlook on inflation”.  Boeing shares further tumbled, declining another 5.93% on Tuesday in wake of the deadly 737 MAX plane crash in Ethiopia.  The U.S. Transportation Department and FAA have not grounded the planes despite the planes being grounded in many Asian and all European countries. 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, AT&T Inc. (USD) 5.45% 3/1/2047 made analysts' 'Conviction Buy' lists. (See the chart for AT&T Inc. bonds below) Corey Mahoney cmahoney@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   Dean Foods Co. 6.5% 3/15/2023 144A + 0.7%
  Intl Wire Group Inc. 10.75% 8/1/2021 144A + 0.2%
-   BNP Paribas VAR% PERP 144A -0.1%
EP Energy   8% 2/15/2025 144A
TransDigm Inc.   6.25% 3/15/2026 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.11% -0.36% 1.77% 4.95% 4.00% 3.01%
Mining 0.16% -0.77% 0.22% 2.59% 6.14% 1.50%
Construction 0.01% -0.03% 0.80% 3.72% 4.39% 2.19%
Manufacturing 0.09% -0.28% 1.10% 3.87% 5.15% 4.50%
Transportion, Communication, Electric/Gas 0.13% -0.08% 1.28% 3.48% 4.74% 4.31%
Wholesale 0.10% -0.22% 0.94% 3.79% 5.27% 3.54%
Retail 0.09% -0.24% 1.69% 4.22% 6.86% 2.77%
Finance, Insurance, Real-Estate 0.11% -0.03% 1.03% 4.33% 5.25% 4.59%
Services 0.06% -0.29% 1.00% 4.19% 5.77% 5.13%
Public Administration 0.03% 0.21% 0.91% 2.72% 2.11% 22.20%
Energy 0.18% -0.60% 0.32% 2.84% 6.05% 1.71%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

1. Manitowoc Co. Inc (USD) 9% 4/1/2026 144A (03/12/2019): 300MM Second Lien Notes, Price at Issuance 100, Yielding 9%.

2. Sunoco LP (USD) 6% 4/15/2027 144A (03/12/2019): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.

1. Starwood Property Trust Inc: $300M senior notes, Expected Q1 2019

2. Calpine Corp.: $1.4B bonds, Expected Q1 2019

Additional Commentary

NEW ISSUANCE WATCH: on 3/12/19 participants welcome a $600MM new corporate-bond offering by
Sunoco LP. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/8/19, with a net outflow of $1.69B, year-to-date $7.8B flowed into high-yield.
 
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD XR14)
SuperValu Inc. (5Y Sen USD XR14)
Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, 
notable secondary activity: 
  • MYOB LTD, Dell International, Amer Sports Corp., Orchid Orthopedic Solutions, Neustar Inc
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 18 bp (basis points), as of 03/12/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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Topics: High Yield, Analytics, bonds, bond market, market analytics, research, market update


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