High Yield Bond Research - June 26, 2019

Posted by Corey Mahoney on Jun 26, 2019 5:10:30 PM
US TREASURY YIELDS SPIKE AS INVESTORS BECOME OPTIMISTIC a trade deal with China is likely to occur following the G20 summit in Japan. The trade spat is blamed for initiating a global growth slowdown and the Fed’s recent dovish tone suggesting aggressive rate cuts. The 10-year note spiked 5.7 basis points. S&P -0.01%, DOW +0.08, NASDAQ +0.41%.
DURABLE GOODS ORDERS DECLINED 1.3 PERCENT IN MAY largely due to a significant drop in transportation orders.  Stripping out cars and planes from the report orders ticked 0.3 percent higher, orders for commercial aircraft plummeted 28 percent alone hindered by Boeing. In light of the drop business investment advanced 0.4 percent supported by an increase in demand for electronic products and machinery. A critical US East Coast refinery plans to permanently go offline following a significant fire sending crude oil 2.46 percent higher. In addition, supplies slipped by 12.8 million barrels week-over-week. Analysts expect to supplies to further shrink, "It's our expectation that we continue to see draws into the second half of the year." 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, QVC Inc. (USD) 4.85% 4/1/2024 made analysts' 'Conviction Buy' lists. (See the chart for QVC Inc. bonds below.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Western Digital Corp. 4.75% 2/15/2026 + 2.8%
  Teva Pharmaceuticals Fin BV 6% 4/15/2024 + 0.1%
-   Frontier Communications Corp. 11% 9/15/2025 -0.4%
Petrobras Global Finance BV   6.85% 6/5/2115
United States STL Corp. New   6.25% 3/15/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.30% 1.68% 5.98% 5.11% 11.86% 13.30%
Mining -0.07% 1.29% 0.00% 0.19% 8.05% 3.32%
Construction -0.07% 0.51% 2.27% 4.19% 10.27% 8.07%
Manufacturing -0.11% 0.51% 1.47% 2.25% 8.74% 6.89%
Transportion, Communication, Electric/Gas -0.19% 0.64% 2.25% 3.86% 9.70% 8.87%
Wholesale -0.18% 0.50% 2.06% 3.30% 10.20% 6.80%
Retail -0.23% 0.36% 1.69% 4.39% 11.47% 8.34%
Finance, Insurance, Real-Estate -0.09% 0.66% 2.11% 3.17% 9.92% 9.13%
Services -0.14% 0.43% 1.94% 3.37% 9.90% 8.38%
Public Administration 0.12% 0.84% 1.87% 3.81% 9.45% 14.66%
Energy -0.11% 1.26% -0.08% 0.17% 7.80% 2.94%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-26T170541.165

New Issues Forward Calendar

1. Antero Midstream Partners LP (USD) 5.75% 1/15/2028 144A (06/25/2019): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

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

1. Alpha Auto Group: $225MM, Expected Week of 6/24

2. Sirius Computers: $300MM, Expected Week of 6/24

Additional Commentary

NEW ISSUANCE WATCH: on 6/26/19 participants welcome a $600MM new corporate-bond offering by PDC Energy Inc. 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)
Weatherford International LTD (5Y Sen USD MR14)
SuperValu Inc. (5Y Sen USD MR14)
San Miguel Corp. (5Y Sen USD CR14)

unnamed - 2019-06-05T084255.682

Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Moneygram Intl. Inc., Vici Properties LLC, Vidrala SA, Hilton Worldwide Finance 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 19 bp (basis points), as of 06/26/19
  • 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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