High Yield Bond Research - June 24, 2019

Posted by Corey Mahoney on Jun 24, 2019 5:07:37 PM
INVESTMENT-GRADE DEBT ROSE SIGNIFICANTLY AGAINST JUNK BONDS in net prices linked to actual trades. Gold prices breached six-year highs settling above $1,400 an ounce following the Fed’s dovish tone after last week’s meeting. The 10-year note fell 3.9 basis points. S&P -0.09%, DOW +0.12, NASDAQ -0.23%.
unnamed - 2019-05-28T172139.160
PACIFIC GAS & ELECTRIC BOND PRICES SURGED on Monday, meanwhile, shares slipped nearly six-percent representing the uncertainty surrounding the bankrupt California utility company. (See the chart below for PG&E bonds)  It is estimated
PG&E needs to raise $9 billion in new equity to fund the devastating fire claims for past and future victims. U.S. companies increased borrowing for equipment by 18 percent in May compared to one year prior. “The continued low interest rate environment, coupled with solid fundamentals in the U.S. economy, provide an incentive for U.S. businesses to expand and grow their operations,” ELFA Chief Executive Officer Ralph Petta said. A “slight deterioration in credit quality” has been noted which raised alarms as companies become more and more levered. 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, Enterprise Products Partners LP (USD) 6.45% 9/1/2040 made analysts' 'Conviction Buy' lists. (See the chart for ADI Indices above.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Alcoa Inc. 5.87% 2/23/2022 (1) + 0.1%
  Pacific Gas & Electric Co. 2.95% 3/1/2026 + 1.2%
-   Tesoro Logistics LP 5.25% 1/15/2025 -0.5%
Petrobras Global Finance BV   7.375% 1/17/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.04% 2.23% 5.63% 5.07% 11.53% 13.44%
Mining 0.07% 1.07% -1.63% -0.32% 7.06% 1.99%
Construction -0.08% 0.82% 2.12% 4.15% 10.37% 7.81%
Manufacturing -0.11% 0.83% 1.32% 2.28% 8.70% 6.60%
Transportion, Communication, Electric/Gas -0.17% 1.17% 2.29% 3.90% 9.96% 9.11%
Wholesale -0.01% 0.87% 1.87% 3.06% 10.04% 6.84%
Retail -0.15% 0.57% 2.00% 4.79% 11.79% 8.99%
Finance, Insurance, Real-Estate -0.17% 0.81% 1.79% 2.92% 9.66% 8.84%
Services -0.08% 0.78% 1.91% 3.27% 9.91% 8.64%
Public Administration -0.18% 0.74% 2.20% 3.06% 9.04% 14.31%
Energy 0.01% 1.07% -1.52% -0.18% 6.91% 1.76%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar

1. Michaels Stores Inc. (USD) 8% 7/15/2027 144A (06/24/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8%.

2. Michaels Stores Inc. (USD) 8% 7/15/2027 Reg S (06/24/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8%.

1. Hexion Inc. : $450MM, Week of 6/24

2. Obsidian Energy LTD: $100MM, Expected Week of 6/17

Additional Commentary

NEW ISSUANCE WATCH: on 6/21/19 participants welcome a $470MM new corporate-bond offering by Talen Energy Supply LLC. 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)
Weatherford International LTD (5Y Sen USD XR14)
Hertz Corp. (5Y Sen USD XR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed - 2019-05-28T172102.935

Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Vidrala SA, Hilton Worldwide Finance LLC, US Renal Care Inc., Perforce Software Inc.
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 25 bp (basis points), as of 06/24/19
  • 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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