High Yield Bond Research - July 29, 2019

Written by Corey Mahoney | Aug 1, 2019 7:11:46 PM

INVESTMENT GRADE DEBT ROSE AGAINST JUNK BONDS in net prices linked to actual trades. Car sales are expected to slump in July as increased costs drove prices higher preventing Americans from signing on the dotted line. Sales are expected to dip by 1.8 percent. Despite the recent slowdown auto dealers are not concerned, “While trade risk remains a threat, transaction prices continue to rise and economic growth is moderating, sales in the second half of the year could outperform expectations.” The 10-year note lost 0.8 basis points. S&P -0.18%, DOW +0.11%, NASDAQ -0.45%.

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INVESTORS ANXIOUSLY AWAIT for the Fed to announce a decision on interest rates following Wednesday’s meeting. The market expects a rate cut of 25 basis points with a potential cut of 50 basis points. Former Fed Chair Janet Yellen stated she endorses a 25 basis point cut, “The global economy has weakened. I think partly it’s weakened because of conflicts over trade and the uncertainty that’s caused for businesses.” Traders have reportedly priced in a 70 basis point rate cut by the end of 2019. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded, Cox Communications Inc. (USD) 8.375% 3/1/2039 made analysts' 'Conviction Buy' lists. (See the chart for ADI bonds below.) Corey Mahoney

Key Gainers and Losers

Volume Leaders

+	Avolon Hldg LTD 5.25% 5/15/2024	+ 0.2%
	Petrobras Global Finance BV 6.85% 6/5/2115	+ 0.8%
-	Sprint Corp. 7.625% 2/15/2025	-0.4%

Sprint Nextel Corp. 7.875% 9/15/2023
Teva Pharmaceutical Industries LTD 4.1% 10/1/2046

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.03%	-0.27%	0.30%	5.72%	11.99%	12.64%
Mining	-0.08%	0.18%	-1.36%	-3.56%	6.41%	0.69%
Construction	-0.01%	0.28%	0.76%	2.90%	11.56%	9.58%
Manufacturing	0.01%	0.15%	0.15%	1.26%	9.01%	6.94%
Transportion, Communication, Electric/Gas	-0.00%	0.59%	1.04%	3.26%	11.22%	9.10%
Wholesale	-0.00%	0.22%	0.61%	2.70%	10.91%	7.57%
Retail	0.05%	0.42%	0.64%	2.54%	12.24%	9.07%
Finance, Insurance, Real-Estate	0.01%	0.35%	1.23%	2.86%	10.52%	9.08%
Services	0.01%	0.26%	0.67%	2.56%	10.42%	9.00%
Public Administration	0.22%	0.93%	1.55%	4.85%	11.26%	12.72%
Energy	-0.09%	0.09%	-1.14%	-2.66%	6.93%	1.50%

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

New Issues	Forward Calendar
1. Walnut Bidco PLC (USD) 9.125% 8/1/2024 144A (07/29/2019):335MM Secured Notes, Price at Issuance 100, Yielding 9.13%. 2. Walnut Bidco PLC (USD) 9.125% 8/1/2024 Reg S (07/29/2019):335MM Secured Notes, Price at Issuance 100, Yielding 9.13%.	1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q3 2019 2. Calpine Corp.: $1.4B bonds, Expected Q3 2019

New Issues

Forward Calendar

1. Walnut Bidco PLC (USD) 9.125% 8/1/2024 144A (07/29/2019):335MM Secured Notes, Price at Issuance 100, Yielding 9.13%.

2. Walnut Bidco PLC (USD) 9.125% 8/1/2024 Reg S (07/29/2019):335MM Secured Notes, Price at Issuance 100, Yielding 9.13%.

1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q3 2019

2. Calpine Corp.: $1.4B bonds, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 7/29/19 participants welcome a $550MM new corporate-bond offering by
Select Medical Corp. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 7/26/19, with a net inflow of $1.3B, Seven week total $9.0B flowed into high-yield.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	San Miguel Corp. (5Y Sen USD CR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

AIR Comm Corp. LLC, Nascar Holdings Inc., NGPL Pipeco LLC, Whatabrands LLC

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 15 bp (basis points), as of 07/29/19
Net positive capital flows into high-yield ETFs & mutual funds

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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