Advantage Data High Yield Bond Market Summary

High Yield Bond Research - March 6, 2019

Posted by Corey Mahoney on Mar 6, 2019 5:10:11 PM
TREASURY YIELDS SANK as investors scaled back risk fleeing to safe-haven assets on Wednesday. ADP released weak private-sector employment numbers for February, companies added 183,000 jobs compared to estimates of 189,000 jobs slowing to a three-month low.  Investors will keep a keen eye on the Labor Department’s official report to be released on Friday.  The 10-year U.S. Treasury note dipped 3.4 basis points.  S&P -0.66%, Dow -0.51%, NASDAQ -0.92%
U.S. TRADE DEFICIT SURGES TO 10-YEAR HIGHS despite numerous efforts from the White House to reduce the shortfall.  The deficit spiked 19 percent in December alone tallying a walloping $621 billion in 2018.  Majority of the deficit stems from unbalanced trade with China rising 12 percent year-over-year totaling $419 billion. New York Fed President John Williams cooled fears of slowing growth insisting there is “isn’t necessarily a cause for alarm” but a “new normal”.  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, Anheuser-Busch Inbev Worldwide Inc. (USD) 8.2% 1/15/2039 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above) Corey Mahoney  (cmahoney@advantagedata.com).

Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 3.95% 12/1/2047 + 0.4%
  Digicel Group LTD 6% 4/15/2021 Reg S + 2.0%
-   Sprint Capital Corp. 6.875% 11/15/2028 -1.1%
Pacific Gas & Electric Co.   3.95% 12/1/2047
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.05% 0.68% 1.46% 5.53% 4.44% 2.91%
Mining -0.05% -0.43% 0.34% 2.34% 7.11% 1.88%
Construction -0.04% -0.39% 0.52% 3.55% 4.36% 1.86%
Manufacturing -0.02% 0.13% 1.27% 3.98% 5.46% 4.67%
Transportion, Communication, Electric/Gas -0.01% 0.18% 1.35% 3.32% 4.82% 4.65%
Wholesale -0.00% 0.18% 1.35% 3.94% 5.70% 4.28%
Retail -0.06% 0.17% 1.59% 3.89% 6.66% 3.66%
Finance, Insurance, Real-Estate -0.03% 0.03% 0.92% 4.19% 5.23% 4.65%
Services -0.01% 0.14% 1.21% 4.06% 5.87% 5.29%
Public Administration 0.03% 0.20% 0.92% 2.74% 1.93% 22.20%
Energy -0.04% -0.32% 0.31% 2.49% 6.79% 2.01%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

1. Credit Acceptance Corp. (USD) 6.625% 3/15/2026 (03/05/2019):400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.63%.

2. Scientific Games Intl. Inc. (USD) 8.25% 3/15/2026 (03/05/2019):1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8.25%.

3. Scientific Games Intl. Inc. (USD) 8.25% 3/15/2026 Reg S (03/05/2019): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8.25%.

1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q1 2019

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

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

Additional Commentary

NEW ISSUANCE WATCH: on 3/5/19 participants welcome a $1100MM new corporate-bond offering by
Scientific Games Intl. Inc.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 2/22/19, with a net inflow of $0.69B, year-to-date $9.7B 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)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, 
notable secondary activity: 
  • Xylem Inc., Amer Sports Corp., Orchid Orthopedic Solutions, Neustar Inc
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 17 bp (basis points), as of 03/06/19
  • 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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