High Yield Bond Research - June 28, 2019

Posted by Corey Mahoney on Jun 28, 2019 5:10:42 PM
EQUITIES ROSE ON FRIDAY following the nation’s largest banks passing the Federal Reserve’s stress tests.  Meanwhile, investors are keeping a watchful eye on the G20 summit in Japan awaiting news of progress toward a resolution to the trade spat. What investors expect are good talks, no implementation of tariffs right away and a continuation in negotiations.” The 10-year note dipped 1.7 basis points.  S&P +0.32%, DOW +0.19, NASDAQ +0.24%.
unnamed - 2019-06-27T171142.238
CONSUMER SPENDING GREW AT A HEALTHY RATE in May indicating the economy remains strong despite a dip in the consumer sentiment report earlier this week. April spending was revised higher to 0.6 percent from 0.3 percent but if inflationary pressures persist the Fed might react. “Below-target inflation is a concern for the Fed, but not the primary reason they are leaning toward cutting interest rates.” A-component Apple of the FAANG group announced plans to shift some manufacturing to China from the US in spite of volatile trade tensions. 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, NiSource Finance Corp. (USD) 5.8% 2/1/2042 made analysts' 'Conviction Buy' lists. (See the chart for ADI Indexes above.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Western Digital Corp. 4.75% 2/15/2026 + 2.2%
  Frontier Communications Corp. 11% 9/15/2025 + 1.8%
-   Pacific Gas & Electric Co. 6.05% 3/1/2034 -0.7%
EMC Corp.   2.65% 6/1/2020
Chesapeake Energy Corp.   8% 1/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.09% 0.29% 5.63% 4.38% 12.44% 14.44%
Mining -0.07% 0.31% 0.29% 0.42% 8.49% 3.41%
Construction -0.17% -0.27% 2.13% 3.85% 10.25% 7.97%
Manufacturing 0.03% -0.10% 1.57% 2.23% 8.86% 6.80%
Transportion, Communication, Electric/Gas 0.02% -0.25% 2.45% 3.90% 10.09% 9.17%
Wholesale -0.02% -0.06% 2.22% 3.45% 10.47% 7.46%
Retail 0.03% -0.20% 1.69% 4.13% 11.30% 8.92%
Finance, Insurance, Real-Estate 0.03% -0.16% 1.96% 3.15% 9.98% 9.14%
Services -0.07% -0.37% 1.63% 3.02% 9.48% 8.37%
Public Administration -0.08% 0.23% 1.87% 3.70% 9.49% 13.66%
Energy -0.01% 0.26% 0.17% 0.34% 8.22% 2.94%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar

1. Allied Universal Holdco LLC (USD) 9.75% 7/15/2027 144A (06/27/2019): 1050MM Senior Unsecured Notes, Price at Issuance 98.641, Yielding 10%.

2. Watford Hldg LTD. (USD) 6.5% 7/2/2029 144A (06/27/2019):175MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

1. Hexion Inc. : $450MM, Week of 6/24

2. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/28/19 participants welcome a $300MM new corporate-bond offering by Granite Merger Sub 2, 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)
Hovnanian Enterprises Inc. (5Y Sen USD XR14)
Controladora Mabe SA de CV (5Y Sen USD CR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Valence Surface Technologies, Moneygram Intl. Inc., Vici Properties LLC, Vidrala SA
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 06/28/19
  • 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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