High Yield Bond Research - June 11, 2019

Posted by Corey Mahoney on Jun 11, 2019 5:09:03 PM
JUNK BONDS ROSE AGAINST INVESTMENT GRADE debt in net prices linked to actual trades as a risk-on sentiment continues. Margaret Patel, a senior portfolio manager at Wells Fargo, sees further gains in the high yield market, “The risk-taker will be rewarded” thanks to the Feds patient stance on monetarypolicy. The 10-year note dipped 0.4 basis points.  S&P -0.03%, DOW -0.05, NASDAQ -0.01%.
PRODUCER PRICES SLIGHTLY ADVANCED IN MAY following a surge in the cost of hospitality accommodations.  Inflation should remain subdued given recent data, “The report suggests limited pipeline inflationary pressures.”  Gig workers or “side hustlers” have revolutionized the labor forceand the U.S. economy. The government is in a debate on whether to treat the workers as contractors or employees.  It is estimated 36 percent of the workforce are classified as gig workers earning a combined for $1.4 trillion in 2018. 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, General Motors Co. (USD) 5% 4/1/2035 made analysts' 'Conviction Buy' lists. (See the chart for General Motors Co. bonds below.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   HCA Inc. 5.25% 4/15/2025 + 0.5%
  Staples Inc. 7.5% 4/15/2026 144A + 1.3%
-   Sprint Capital Corp. 6.875% 11/15/2028 -1.5%
Stericycle Inc.   5.375% 7/15/2024 144A
Intelsat Jackson Hldg SA   9.75% 7/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.16% 0.83% 1.02% 2.07% 7.74% 10.56%
Mining 0.14% 0.53% -1.91% 0.57% 6.84% 1.66%
Construction 0.08% 0.94% 0.93% 3.91% 8.63% 6.49%
Manufacturing 0.18% 1.13% 0.12% 2.40% 7.65% 6.03%
Transportion, Communication, Electric/Gas 0.10% 0.83% 1.22% 3.69% 8.62% 7.63%
Wholesale 0.13% 1.15% 0.83% 3.09% 8.87% 5.55%
Retail 0.20% 1.26% 0.25% 4.73% 10.76% 7.78%
Finance, Insurance, Real-Estate 0.14% 0.90% 0.69% 3.02% 8.60% 7.87%
Services 0.15% 1.22% 1.01% 3.12% 8.96% 8.04%
Public Administration 0.43% 0.74% 1.26% 2.54% 7.95% 13.25%
Energy 0.10% 0.41% -1.80% 0.65% 6.77% 1.57%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-11T170729.963

New Issues Forward Calendar

1. Graphic Packaging International Inc. (USD) 4.75% 7/15/2027 144A (06/11/2019): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

2. Hilton Domestic Operating Co. (USD) 4.875% 1/15/2030 144A (06/11/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

1. Diamondback Energy Inc.: High-yield notes, Expected Q2 2019

2. Harsco Corp.: Unsecured Debt, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/11/19 participants welcome a $1000MM new corporate-bond offering by Hilton Domestic Operating Co.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 6/7/19, with a net outflow of $3.2B, year-to-date $6.6B 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)

unnamed - 2019-06-05T084255.682

Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • United PF Holdings LLC, Packers Holdings, Charles Schwab Corp., Tundra Energy Marketing 
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 17 bp (basis points), as of 06/11/19
  • 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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