High Yield Bond Research - July 18, 2019

Posted by Pierre Robert on Jul 18, 2019 5:08:33 PM
PEMEX unvieled yesterday in a 200 page business plan that they plan to overhaul PEMEX. They plan cost cuts that would create $6.6 billion in savings. The government of Mexico plans to inject $7.8 billion into PEMEX. PEMEX also plans to invest $104.6 billion over the next 6 years. This unveiling caused  Petroleos Mexicanos (USD) 6.5% 3/13/2027, Petroleos Mexicanos (USD) 3.5% 1/30/2023, Petroleos Mexicanos (USD) 4.875% 1/18/2024, Petroleos Mexicanos (USD) 6.5% 6/2/2041, Petroleos Mexicanos (USD) 6.375% 1/23/2045 to trade over $200 million bonds today.
US and EU SOVEREIGNS yields continue to by and large have downward pressure today. The US was still above 2% but the entire yield curve was down. White House and various Fed official desire additional stimulus.  Europe was mixed to down still concerned with negative yields. Britain’s yield curve was up. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bondsHigh-grade edged out high-yield.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, South Carolina Electric & Gas Company (USD) 5.8% 1/15/2033 made analysts' 'Conviction Buy' lists. (See the chart for ADI index above.) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Beazer Homes USA Inc. 5.875% 10/15/2027 + 3.5%
  Petrobras Global Finance BV 6.85% 6/5/2115 + 1.0%
-   Whiting Petroleum Corp. 6.625% 1/15/2026 -4.3%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 -2.3%
Beazer Homes USA Inc.   5.875% 10/15/2027
Whiting Petroleum Corp.   6.625% 1/15/2026
Petrobras Global Finance BV   6.85% 6/5/2115
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.02% 0.35% 2.55% 4.89% 11.52% 11.27%
Mining -0.29% -0.56% 0.90% -2.53% 7.47% 2.15%
Construction -0.08% -0.09% 1.34% 2.76% 11.04% 8.66%
Manufacturing -0.05% -0.12% 1.15% 1.92% 9.40% 7.57%
Transportion, Communication, Electric/Gas 0.03% -0.09% 1.56% 2.98% 10.58% 8.78%
Wholesale -0.01% 0.10% 1.26% 2.69% 10.79% 7.71%
Retail -0.02% -0.02% 0.78% 2.62% 12.05% 8.70%
Finance, Insurance, Real-Estate 0.03% 0.11% 1.56% 2.78% 10.55% 9.30%
Services -0.04% -0.00% 0.92% 2.45% 10.26% 8.99%
Public Administration 0.22% 0.53% 1.86% 4.43% 10.65% 13.72%
Energy -0.23% -0.56% 0.98% -1.67% 7.83% 2.74%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-07-18T170626.227

New Issues Forward Calendar

1. Acrisure LLC (USD) 10.125% 8/1/2026 144A (07/18/2019): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 10.13%.

2. Acrisure LLC (USD) 10.125% 8/1/2026 Reg S (07/18/2019):400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 10.13%.

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

3. General Electric Distributed Power: $600M high-yield bonds, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 7/18/19 participants welcome a $500MM new corporate-bond offering by Ithaca Energy 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)
Rite Aid Corp. (5Y Sen USD MR14)
Weatherford International LTD (5Y Sen USD MR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed - 2019-07-18T170629.635

Loans and Credit Market Overview


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 19 bp (basis points), as of 07/18/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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Topics: Investment Grade, Loans, Analytics, bonds, junk bonds, bond market, market analytics, New Issues, News, Syndicated Bonds, syndicated, research, market update

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