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%.
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. |
|
| 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) |
Loans and Credit Market Overview
SYNDICATED LOANS HIGHLIGHTS:
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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