Advantage Data High Yield Bond Market Summary

Investment Grade Bond Research - March 11, 2019

Posted by Niral Mehta on Mar 11, 2019 5:22:09 PM

EQUITIES CLIMBED HIGHER as a possible U.S. and China trade agreement could soon be accomplished. Beijing’s top central banker stated, “China had agreed not to devalue its currency to support its exporters.” Shares of Boeing contracted after 737 operated by an Ethiopian airline crashed when taking off from the capital of Addis Ababa on Sunday. U.S. consumers ramped up their spending in February on durable and non-durable goods, a sign of economic growth in Q1 of 2019. The 10-year U.S. Treasury note increased 0.5 basis points and the 30-year note rose 1.4 basis points.  S&P +1.25%, Dow +0.70%, NASDAQ +1.84%.  

DEMAND FOR GOVERNMENT BONDS IS GROWING AS INVESTORS weigh the Fed’s next interest-rate moves. Powell stated, “the current interest-rate setting is neutral.” The main risk to the U.S. economy is slower growth in China and Europe, which could derail U.S. economic growth. Risk assets are seeing favorable capital inflow, as inflation and prices of goods are on the uptick. Powell thinks the markets are “fairly valued” to the current economic data. Tesla will keep more car stores open, but will increase car prices by 3% to offset additional expenses. 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, Alcoa Inc. (USD) 5.95% 2/1/2037 made analysts' 'Conviction Buy' lists. (See the chart for Alcoa Inc. bonds below) Niral Mehta (nmehta@advantagedata.com).

Key Gainers and Losers Volume Leaders
+   Citigroup Inc. VAR% 6/1/2024 + 0.1%
  CVS Health Corp. 3.7% 3/9/2023 + 0.0%
-   Verizon Communications Inc. 4.522% 9/15/2048 -0.4%
Verizon Communications Inc.   4.522% 9/15/2048
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Northrop Grumman Corp.   2.93% 1/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.07% 0.54% 0.40% 3.03% 2.59% 4.42%
Mining -0.04% 0.39% 0.41% 4.26% 3.49% 3.28%
Construction -0.04% 0.73% 0.52% 3.28% 2.43% 3.85%
Manufacturing -0.00% 0.43% 0.17% 3.13% 2.44% 3.15%
Transportion, Communication, Electric/Gas -0.01% 0.69% 0.47% 3.96% 2.94% 3.89%
Wholesale -0.10% 0.26% 0.55% 3.75% 3.60% 3.07%
Retail 0.01% 0.48% 0.07% 3.00% 2.47% 3.20%
Finance, Insurance, Real-Estate 0.02% 0.37% 0.51% 2.99% 2.11% 3.95%
Services 0.05% 0.60% 0.15% 3.20% 2.27% 3.71%
Public Administration -0.01% 0.32% 0.25% 1.53% 0.75% 3.28%
Energy -0.05% 0.50% 0.49% 4.51% 3.73% 3.89%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

1. Helmerich & Payne Intl. Drilling Co. (USD) 4.65% 3/15/2024 (03/11/2019): 487MM Senior Unsecured Notes.

 

Additional Commentary

NEW ISSUANCE WATCH: on 3/11/19 participants welcome a $487MM new corporate-bond offering by
Helmerich & Payne Intl. Drilling Co. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/8/2019, 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)
Hertz Corp. (5Y Sen USD MR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
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 16 bp (basis points), as of 03/11/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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Topics: Investment Grade, Analytics, bonds, bond market, market analytics, research, market update


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