Advantage Data High Yield Bond Market Summary

Investment Grade Bond Research - March 4, 2019

Posted by Corey Mahoney on Mar 4, 2019 5:14:53 PM

EQUITIES TUMBLE AS INVESTORS BECOME SKEPTICAL on initial reports that the U.S. and China are nearing a landmark deal.  Negotiations are nearing an agreement which will cause the U.S. to reduce tariffs on $200 billion of Chinese goods.  As part of the deal, China is expected to accelerate purchases on U.S. goods and the U.S. desires the ability to re-initiate tariffs if talks on intellectual property fall apart.  The 10-year U.S. Treasury note lost 2.6 basis points.  S&P -0.39%, Dow -0.79%, NASDAQ -0.23%

TREASURY YIELDS WERE PUSHED LOWER while prices rose as investors fled to safe-haven assetsamid additional weak economic data.  Construction spending suddenly declined in December by 4.1 percent in 2018, the worst reading since 2011.  N-component Netflix, of the FAANG group, will soon have a new competitor as AT&T’s buyout of Time Warner is official.  The organization will be restructured and overhauled giving it “agility and flexibility” allowing the company to be a fierce competitor in the streaming service market, AT&T dipped 2.74%. Crude prices surged 25% in the first two months of 2019 subsequently the result of OPEC members slashing output in 2019.  Saudi Arabia lowered production by 400,000 barrels a day accounting for half of the output lost and in March output in Saudi Arabia is expected to slip below 10 million barrels per day.  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) 4.5% 5/15/2035 made analysts' 'Conviction Buy' lists. (See the chart for AT&T Inc. below). Corey Mahoney  (

Key Gainers and Losers Volume Leaders
+   Maple Escrow Subsidiary Inc. 5.085% 5/25/2048 144A + 0.3%
  Penske Truck Leasing 3.4% 11/15/2026 144A + 0.1%
-   Credit Agricole SA VAR% PERP 144A (2) -0.0%
Cooperatieve Rabobank UA   (USD) FLT% 9/26/2023 144A
Enel Finance Intl. NV   2.875% 5/25/2022 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.24% -0.44% 0.67% 2.92% 2.04% 4.19%
Mining -0.20% -0.33% 0.25% 4.62% 2.94% 2.59%
Construction -0.17% -0.39% 0.38% 3.03% 1.43% 3.10%
Manufacturing -0.14% -0.29% 0.11% 3.37% 2.02% 2.59%
Transportion, Communication, Electric/Gas -0.23% -0.47% 0.32% 4.28% 2.25% 3.02%
Wholesale 0.03% 0.09% 0.63% 3.50% 2.82% 2.59%
Retail -0.13% -0.39% 0.12% 3.35% 1.98% 2.47%
Finance, Insurance, Real-Estate -0.09% -0.10% 0.38% 2.98% 1.70% 3.42%
Services -0.19% -0.45% -0.05% 3.43% 1.68% 3.00%
Public Administration -0.10% -0.11% 0.29% 1.60% 0.45% 2.90%
Energy -0.20% -0.31% 0.38% 4.86% 3.09% 3.08%
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]

1. Leggett & Platt Inc. (USD) 4.4% 3/15/2029 (03/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.391, Yielding 4.48%.


Additional Commentary

NEW ISSUANCE WATCH: on 3/4/19 participants welcome a $450MM new corporate-bond offering by
Union Electric Co.  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


Deals recently freed for secondary trading, notable secondary activity:
  • Amer Sports Corp., Orchid Orthopedic Solutions, Neustar Inc, Minotaur Acquisition 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 18 bp (basis points), as of 03/04/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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Topics: Investment Grade, bond market, research, market update

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