High Yield Bond Research - July 17, 2019

Written by Corey Mahoney | Jul 17, 2019 9:10:07 PM

INVESTMENT GRADE DEBT ROSE AGAINST junk bonds in net prices linked to actual trades. Total assets in US money market funds retreated from nearly 10-year highs last week as yields fall. Traders are estimating a 65 percent chance of a 25 basis point cut. “Even though the Fed will almost certainly cut rates at the end of the month, additional cuts depend heavily on the balance of economic data.” S&P-0.47%, DOW -0.30, NASDAQ -0.24% The 10-year note dipped 4.6 basis points.

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MORTGAGE APPLICATIONS SLIPPED for the third consecutive week as borrowing costs ticked higher, application volume shrunk by 1.1 percent. Refinancing activity increased week over week and was 87 percent higher than one year ago. Homebuilding often reports tandem results with applications decreased for the second month as permits fell to a two year low. “Residential housing construction is one of the leading indicators of a recession, and while construction activity isn’t dropping precipitously, housing is stuck in a rut.” 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, PPL Electric Utilities Corp. (USD) 5.2% 7/15/2041 made analysts' 'Conviction Buy' lists. (See the chart for ADI index above.) Corey Mahoney (cmahoney@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	CNH Industrial NV 4.875% 4/1/2021	+ 0.1%
	Goldman Sachs Group Inc. 5% PERP	+ 2.2%
-	Teva Pharmaceuticals Fin BV 6% 4/15/2024	-0.6%

Antero Resources Corp. 5.625% 6/1/2023
CNH Industrial NV 4.875% 4/1/2021

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	-0.22%	-0.12%	2.94%	5.81%	13.73%	15.26%
Mining	-0.33%	-0.04%	1.03%	-2.12%	8.03%	2.81%
Construction	0.03%	0.06%	1.37%	2.91%	11.25%	9.09%
Manufacturing	-0.06%	-0.10%	1.10%	1.66%	9.11%	7.46%
Transportion, Communication, Electric/Gas	-0.06%	-0.05%	1.64%	2.93%	10.53%	8.99%
Wholesale	-0.02%	0.11%	1.28%	2.79%	10.83%	7.78%
Retail	0.00%	0.18%	0.71%	3.29%	12.65%	9.95%
Finance, Insurance, Real-Estate	-0.02%	0.13%	1.40%	2.58%	10.47%	9.26%
Services	-0.03%	0.07%	0.80%	2.10%	9.92%	8.69%
Public Administration	0.02%	0.33%	1.97%	4.48%	10.40%	13.25%
Energy	-0.32%	-0.13%	1.01%	-1.45%	8.23%	3.27%

Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
(None Current 07/17/2019)	1. Sinclair Broadcast Group Inc.: $2.55B, seven-year senior secured notes; $2.325B eight year senior unsecured notes 2. DDM Holding AG: ¬100MM, Expected Q3 2019

New Issues

Forward Calendar

(None Current 07/17/2019)

1. Sinclair Broadcast Group Inc.: $2.55B, seven-year senior secured notes; $2.325B eight year senior unsecured notes

2. DDM Holding AG: ¬100MM, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 7/12/19 participants welcome a $600MM new corporate-bond offering by Horizon Pharma Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 6/21/19, with a net outflow of $602MM, year-to-date $8.9B 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 XR14)	Cable & Wireless Communication (5Y Sen USD CR14) SuperValu Inc. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Consolidated Precision Products, Starwood Property Trust Inc., Heritage Power, LLC

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 07/17/19
Net positive capital flows into high-yield ETFs & mutual funds

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