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 (cmahoney@
| Key Gainers and Losers | Volume Leaders | |||||||||
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Cooperatieve Rabobank UA (USD) FLT% 9/26/2023 144A Enel Finance Intl. NV 2.875% 5/25/2022 144A |
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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
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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