High Yield Bond Research - June 25, 2019

Posted by Corey Mahoney on Jun 25, 2019 5:15:58 PM
EQUITIES DRIFTED LOWER following an announcement from Federal Reserve President Jerome Powell stating “my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation“. Currently Wall Street believes there is a 65.7 percent chance of a 25 basis point cut and a 35.4 percent chance of a 50 basis point cut. The 10-year note fell 2.8 basis points settling below 2 percent.  S&P -0.95%, DOW -0.67, NASDAQ -1.51%.
unnamed - 2019-05-28T172139.160


CONSUMER CONFIDENCE SLIPS TO A TWO-YEAR LOW IN JUNE amid rising trade tensions with China revealing a jolt among consumer.  Despite the fall in confidence, spending remains strong suggesting short term uncertainty with consumers; the index declined to 121.5 from May’s reading of 131.5.  Newly built home sales suddenly dropped 7.8 percent in May despite a deterioration in mortgage rates making home ownership more appealing.  Pacific Gas & Electric bondholders propose a bankruptcy exit plan involving an injection worth $30 billion to pay off obligations from the devastating wildfires. Bondholders claim PG&E is taking its time to action a plan and “the need to exit bankruptcy expeditiously is paramount”. 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, American International Group Inc. (USD) 8.175% 5/15/2068 made analysts' 'Conviction Buy' lists. (See the chart for ADI Indices above.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 6.25% 3/1/2039 + 5.9%
  Tenet Healthcare Corp. 8.125% 4/1/2022 + 0.2%
-   CNO Financial Group 5.25% 5/30/2025 -0.1%
HCA Inc.   7.5% 2/15/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.13% 2.14% 5.83% 4.78% 11.64% 13.39%
Mining 0.09% 1.67% -0.24% 0.11% 7.57% 2.33%
Construction -0.10% 0.77% 2.27% 4.25% 10.24% 7.94%
Manufacturing -0.04% 0.88% 1.60% 2.33% 8.82% 6.74%
Transportion, Communication, Electric/Gas 0.05% 1.09% 2.45% 3.87% 10.00% 9.30%
Wholesale 0.05% 0.93% 2.27% 3.35% 10.27% 7.31%
Retail 0.02% 0.72% 1.87% 4.92% 12.09% 8.64%
Finance, Insurance, Real-Estate 0.10% 0.92% 2.03% 3.06% 9.93% 9.11%
Services -0.03% 0.74% 2.00% 3.39% 9.85% 8.34%
Public Administration 0.22% 0.63% 1.77% 3.27% 9.32% 14.54%
Energy 0.13% 1.69% -0.30% 0.17% 7.40% 2.15%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar

1. Herc Hldg, Inc. (USD) 5.5% 7/15/2027 144A (06/25/2019): 1200MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

2. Post Holdings Inc. (USD) 5.5% 12/15/2029 144A (06/25/2019):750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

1. Hexion Inc. : $450MM, Week of 6/24

2. E.W. Scripps: $1.85B term loans and unsecured debt, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/25/19 participants welcome a $300MM new corporate-bond offering by William Lyon Homes 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 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: 
  • Vici Properties LLC, Vidrala SA, Hilton Worldwide Finance LLC, US Renal Care Inc.
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 23 bp (basis points), as of 06/25/19
  • 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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