SUBDUED INFLATION REINFORCES the Fed’s case to “act as appropriate to sustain the expansion” by slashing interest rates. Risk-off sentiment prevailed as investment grade debt rose against high yield bonds in net prices linked to actual trades. The Treasury yield curve steepened on Wednesday ahead of the Fed’s meeting next week signaling expectations of a rate cut. The 10-year note dipped 2.2 basis points. S&P -0.20%, DOW -0.17, NASDAQ -0.38%

 

CONSUMER PRICE INDEX TICKED HIGHER IN MAY rising a seasonally adjusted 0.1 percent down from a 0.2 percent gain in April.  Gasoline and used auto prices dragged the index lower falling 0.5 percent and 1.4 percent respectively.  Year-over-year CPI declined 2 percent, “It definitely gives the Fed scope to loosen but I don’t think low core inflation on its own is going to cause the Fed to cut interest rates.” Delivery of July crude slipped 4.11 percent marking the third consecutive day of declines upon a report supplies climbed by 2.2 million barrels.  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, Microsoft Corp. (USD) 4.2% 11/3/2035 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Corey Mahoney (cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Petrobras Global Finance BV 8.75% 5/23/2026 + 0.4%   Citizens Communications Co. 9% 8/15/2031 (1) + 0.4% -   Teva Pharmaceuticals Fin BV 6.75% 3/1/2028 -1.7%	Goodyear Tire & Rubber Co.   5% 5/31/2026 Western Digital Corp.   4.75% 2/15/2026

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.13% 1.03% 1.57% 2.85% 7.50% 9.32% Mining 0.21% 0.28% -1.79% 0.56% 7.19% 1.89% Construction 0.13% 0.84% 1.11% 4.31% 9.21% 6.53% Manufacturing 0.11% 0.89% 0.31% 2.56% 7.95% 6.28% Transportion, Communication, Electric/Gas 0.03% 0.71% 1.16% 3.68% 8.86% 7.89% Wholesale 0.17% 1.04% 0.97% 3.09% 8.97% 5.75% Retail 0.12% 1.29% 0.78% 4.90% 12.10% 7.64% Finance, Insurance, Real-Estate 0.07% 0.76% 0.73% 3.02% 8.69% 7.96% Services 0.07% 0.96% 1.12% 3.14% 9.06% 8.09% Public Administration 0.22% 1.27% 1.47% 2.97% 8.19% 13.49% Energy 0.13% 0.13% -1.81% 0.51% 6.86% 1.50%   Total returns (non-annualized) by rating, market weighted.

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. Nexstar Media Group Inc.: Possible new bonds, Expected Q3 2019 2. Harsco Corp.: Unsecured Debt, Expected Q3 2019

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) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity: 

• Avantor Performance Materials Inc., United PF Holdings LLC, Packers Holdings

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 20 bp (basis points), as of 06/12/19
• Net positive capital flows into high-yield ETFs & mutual funds 

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