High Yield Bond Research - June 6, 2019

Posted by Corey Mahoney on Jun 6, 2019 5:15:16 PM
RISK-ON SENTIMENT PREVAILED THURSDAY following a report the U.S. is delaying tariffs on Mexican goods and a stable unemployment report contrary to ADP’s data on Wednesday. New claims fell by 2,500as employers struggle to source labor in a tight market. The gap between the two and ten-year note narrowed by 4.4 basis points standing at 23 basis points. The 10-year note lost 0.2 basis points. S&P+0.79%, DOW +0.90, NASDAQ +0.66%.
CRUDE FELL INTO BEAR MARKET TERRITORY YESTERDAY amid economic concerns and escalating trade tensions.  Inventory of U.S. crude supplies rose by 6.8 million barrels last week, the largest increase in five weeks.  Delivery of July crude climbed 2.90 percent recovering from yesterday’s 3.4 percent loss.  Recent declines are linked to “an over-reaction” of a global consumption slowdown, in result, “OPEC states are going do everything they can to stabilize prices. OPEC will not let crude prices continue to fall like this in the long-run”.  AT&T announced a streaming service to compete with Netflix, Hulu, and Prime Video abandoning plans for a three-tiered service.  DirectTV owned by AT&T lost 544,000 customersin the first quarter largely due customers cutting the cord, in addition, the company lost 83,000 subscribersfrom its online service. 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, MGM Resorts International (USD) 4.625% 9/1/2026 made analysts' 'Conviction Buy' lists. (See the chart for MGM Resorts International below.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   California Resources Corp. 8% 12/15/2022 144A + 0.4%
  US Steel Corp. 6.875% 8/15/2025 + 0.1%
-   L Brands Inc. 5.25% 2/1/2028 -4.0%
ARC Properties Operating Partnership LP   4.6% 2/6/2024
Mattel Inc.   6.75% 12/31/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.16% 0.56% -0.33% 1.53% 7.29% 9.47%
Mining -0.12% -0.61% -2.90% -0.65% 6.06% 0.98%
Construction 0.10% 0.30% 0.08% 3.15% 8.41% 6.58%
Manufacturing 0.15% 0.28% -0.63% 1.69% 7.31% 6.05%
Transportion, Communication, Electric/Gas 0.12% 0.49% 0.11% 2.99% 8.20% 7.67%
Wholesale 0.17% 0.24% -0.17% 1.82% 7.94% 5.05%
Retail 0.13% 0.30% -0.60% 3.45% 10.01% 7.63%
Finance, Insurance, Real-Estate 0.12% 0.23% -0.35% 2.20% 7.96% 7.18%
Services 0.15% 0.24% 0.14% 1.94% 8.01% 7.47%
Public Administration 0.12% 0.12% 0.12% 2.12% 6.97% 11.35%
Energy -0.18% -0.61% -2.77% -0.27% 6.10% 1.05%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-06T171403.979

New Issues Forward Calendar

1. Sirius XM Radio Inc. (USD) 5.5% 7/1/2029 144A (06/05/2019):1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

2. L Brands Inc. (USD) 7.5% 6/15/2029 (06/05/2019): 500MM Senior Unsecured Notes, Price at Issuance 98.286, Yielding 7.75%.

1. General Electric Distributed Power: $600M high-yield bonds, Expected Q2 2019

2. Calpine Corp.: $1.4B bonds, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/5/19 participants welcome a $1250MM new corporate-bond offering by Sirius XM Radio Inc.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/31/19, with a net outflow of $1.3B, year-to-date $9.8B 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 CR14)
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: 
  • Packers Holdings, Charles Schwab Corp., Tundra Energy Marketing , Louis Dreyfus Corp.
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 14 bp (basis points), as of 06/06/19
  • 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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