High Yield Bond Research - May 9, 2019

Posted by Andrew Robartes on May 9, 2019 5:18:33 PM
Find me on:
STOCKS DECLINED AGAIN ON THURSDAY as a week of uncertainty over U.S.-China trade relations continues. The world's two largest economies have yet to strike a trade deal, but proceedings have officially begun to increase tariffs on Chinese imports from 10% to 25%. In the midst, the Dow Jones dropped 139 points. 10-Year U.S. Treasury Notes fell 3 basis points. S&P -0.30%, Dow -0.54% , NASDAQ -0.41%. 
 
IN THE CORPORATE BOND MARKET, IBM Corp. recently sold $20B worth of senior unsecured notesto fund the purchase of software company Red Hat Inc. This is the largest issuance of corporate debt this year, surpassing Bristol-Myers Squibb's $19B deal from just a day earlier. According to Mike Collins, a portfolio manager at PGIM Fixed Income, the demand for corporate debt indicates that "the fundamentals of the global economy look decent, especially the U.S. economy, and companies are being opportunistic and issueing while they can". IBM has pledged to keep Red Hat independently run after the acquistion.  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, Time Warner Inc. (USD) 7.7% 5/1/2032 made analysts' 'Conviction Buy' lists. (See the chart for ADI Inedexes above.) Andrew Robartes (arobartes@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   Wachovia Capital Trust III FLT% 3/15/2042 + 0.2%
  Avon Products Inc. 5% 3/15/2023 + 1.0%
-   CenturyLink Inc. 7.5% 4/1/2024 -0.8%
Mississippi Power Co.   3.95% 3/30/2028
US Steel Corp.   6.875% 8/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.03% 0.33% 1.15% 5.18% 8.02% 9.92%
Mining 0.03% -0.65% 0.33% 2.75% 8.80% 3.99%
Construction -0.09% -0.54% 0.79% 4.56% 8.31% 5.70%
Manufacturing -0.07% -0.33% 0.64% 3.51% 7.58% 6.67%
Transportion, Communication, Electric/Gas -0.08% -0.28% 0.86% 4.50% 7.93% 7.20%
Wholesale -0.00% -0.15% 0.92% 3.45% 8.01% 5.44%
Retail -0.10% -0.17% 2.06% 4.68% 10.11% 8.10%
Finance, Insurance, Real-Estate -0.05% -0.21% 0.69% 3.52% 7.85% 6.91%
Services -0.07% -0.27% 0.46% 3.18% 7.61% 7.45%
Public Administration -0.17% 0.56% 0.65% 3.76% 6.68% 12.07%
Energy 0.02% -0.67% 0.63% 2.86% 8.68% 3.55%
 
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-05-09T171728.905

New Issues Forward Calendar

1. Eagle Holding Co II LLC (USD) 7.75% 5/15/2022 144A (05/08/2019): 900MM Unsecured Notes, Price at Issuance 99, Yielding 8.13%.

2. SpringLeaf Finance Corp. (USD) 6.625% 1/15/2028 (05/08/2019):800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.63%.

1. General Electric Distributed Power: $600M high-yield bonds, Expected Q2 2019

2. E.W. Scripps: $1.85B term loans and unsecured debt, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 5/09/19 participants welcome a $825MM new corporate-bond offering by Virgin Media Secured Finance PLC. The most recent data showed money flowed into high-yield ETFs/mutual funds for the week ended 5/03/19, with a net inflow of $21.3MM, year-to-date $13.9B 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 CR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
Cable & Wireless Communication (5Y Sen USD CR14)

unnamed (92)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, 
notable secondary activity: 
  • Rikshem AB, Broadcom LTD, Verifone Inc., Twin River Management Group 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 12 bp (basis points), as of 05/09/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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


Are you using AdvantageData?

AdvantageData is your fixed income solution for pricing, analytics, reports, and insight on approximately:

  • 500,000+ U.S. and international corporate bonds
  • Over 6,200+ CDS reference entities
  • Over 22,000+ syndicated loans
  • Over 100 equity markets worldwide
  • One platform 16 products and services from debt to CDS to loans to mid-market
  • Used by top buy and sell-side firms worldwide

Subscribe to Email Updates

Recent Posts