High Yield Bond Research - June 7, 2019

Posted by Corey Mahoney on Jun 7, 2019 5:10:00 PM
INVESTMENT GRADE DEBT EDGED HIGHER as investors flee to safe-haven assets predicting the Fed will cut interest rates. BlackRock anticipates the Fed to cut rates “over the next few months” by 25-50 basis points following a weak employment report and continued trade tensions. Gold rose for the eighth straight session. The 10-year note sank 3.5 basis points. S&P +1.19%, DOW +1.16, NASDAQ +1.74%.
U.S. JOBS REPORT DISAPPOINTS ADDING A DISMAL 75,000 JOBS in May, falling short of expectations.  The report is another signal the economy is cooling and might prompt the Fed to cut rates.  Martha Gimbel an economist stated, “While one might expect slower jobs growth at this point in the economic cycle, coming in the context of tariffs and other economic headwinds makes this number more worrisome”.  May’s gains registered as the 104th straight month of a growing labor force.  The labor force has been resilient through the trade war with china up until now. 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, Anheuser-Busch Inbev Worldwide Inc. (USD) 4.439% 10/6/2048 made analysts' 'Conviction Buy' lists. (See the chart for ADI bonds above.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   HCA Inc. 6.5% 2/15/2020 + 0.3%
  Netflix Inc. 5.5% 2/15/2022 + 0.2%
-   Frontier Communications Corp. 11% 9/15/2025 -0.5%
Envision Healthcare Corp.   8.75% 10/15/2026 144A
Park Aerospace Hldgs LTD   5.25% 8/15/2022 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.04% 0.41% -0.26% 1.53% 6.11% 7.45%
Mining -0.09% -0.81% -2.99% -0.50% 6.19% 1.28%
Construction 0.14% 0.43% 0.17% 3.51% 8.23% 6.05%
Manufacturing 0.08% 0.29% -0.64% 1.64% 7.14% 5.76%
Transportion, Communication, Electric/Gas 0.07% 0.48% 0.30% 3.11% 8.22% 7.69%
Wholesale 0.03% 0.11% -0.02% 2.17% 8.67% 5.40%
Retail 0.02% 0.31% -0.48% 4.08% 10.73% 8.17%
Finance, Insurance, Real-Estate 0.09% 0.25% -0.07% 2.38% 8.21% 7.64%
Services 0.09% 0.34% 0.14% 2.24% 8.32% 7.74%
Public Administration 0.54% 0.54% 0.84% 2.33% 7.54% 12.66%
Energy -0.12% -0.82% -3.05% -0.39% 5.99% 1.01%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar

1. GrubHub Inc (USD) 5.5% 7/1/2027 Reg S (06/06/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

2. Vistra Operations Co LLC (USD) 5% 7/31/2027 Reg S (06/06/2019): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

1. Diamondback Energy Inc.: High-yield notes, Expected Q2 2019

2. Harsco Corp.: Unsecured Debt, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 6/7/19 participants welcome a $1300MM new corporate-bond offering by Vistra Operations Co LLC.  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)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

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 15 bp (basis points), as of 06/07/19
  • 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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