MILD RISK-ON SENTIMENT PREVAILS as junk bonds edged out investment-grade debt in prices linked to actual trades. Boston Fed president Eric Rosengren, the Feds hawkish president conceded his stance on raising rates Tuesday morning echoing Chairman Jerome Powell’s words of “patience”. Rosengren known to be bullish stated, “With less ebullience in financial markets and no immediate signs of inflationary pressures, patiently watching to see how the economy develops is the appropriate policy for now.” The 10-year U.S. Treasury note settled up 0.4 basis points.  S&P -0.11%, Dow -0.05%, NASDAQ -0.02%

U.S. SERVICE SECTOR UNEXPECTEDLY EXPANDED in February, a critical indicator revealing the economy has picked up despite concerns of a slowdown.  The ISM non-manufacturing purchasing managers index advanced to 59.7 from 56.7 in January, economists estimated a slight increase to 57.2.  The February ISM report marks 109 consecutive months of expansion in the service sector and showed an uptick in orders compared to the previous month.  Adjusted new homes increased a trivial 3.7% in December compared to the prior month down 2.4% from last year, finishing the year on a weak note.  ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds. High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded, Pacific Gas & Electric Co. (USD) 3.75% 2/15/2024 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above). Corey Mahoney  (cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Kraft Heinz Co. 4.375% 6/1/2046 (2) + 0.3%   Ford Motor Co. 4.75% 1/15/2043 + 0.0% -   Wal-Mart Stores Inc. 2.85% 6/23/2020 -0.1%	General Electric Co.   FLT% PERP (1) Wal-Mart Stores Inc.   2.85% 6/23/2020

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.02% -0.18% 0.81% 2.72% 2.08% 4.30% Mining 0.11% -0.17% 0.53% 4.14% 3.19% 3.09% Construction 0.15% -0.16% 0.73% 2.91% 1.77% 3.45% Manufacturing 0.08% -0.15% 0.34% 3.04% 2.18% 2.84% Transportion, Communication, Electric/Gas 0.14% -0.25% 0.66% 3.67% 2.46% 3.44% Wholesale -0.00% 0.20% 0.92% 3.41% 3.18% 2.97% Retail 0.08% -0.25% 0.35% 2.87% 2.13% 2.77% Finance, Insurance, Real-Estate 0.05% -0.03% 0.55% 2.93% 1.84% 3.64% Services 0.12% -0.24% 0.24% 3.01% 1.87% 3.37% Public Administration 0.05% -0.02% 0.32% 1.53% 0.50% 2.98% Energy 0.14% -0.15% 0.65% 4.36% 3.47% 3.54%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Union Electric Co. (USD) 3.5% 3/15/2029 (03/04/2019): 450MM Secured Notes, Price at Issuance 99.915, Yielding 3.51%. 2. WEC Energy Group Inc. (USD) 3.1% 3/8/2022 (03/04/2019):350MM Senior Unsecured Notes, Price at Issuance 99.937, Yielding 3.12%.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	SuperValu Inc. (5Y Sen USD MR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

Deals recently freed for secondary trading, notable secondary activity:

• Xylem Inc., 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 18 bp (basis points), as of 03/05/19
• Net positive capital flows into high-yield ETFs & mutual funds

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