High Yield Bond Research - March 11, 2019

Written by Niral Mehta | Mar 11, 2019 9:19:20 PM

EQUITIES CLIMBED HIGHER as a possible U.S. and China trade agreement could soon be accomplished. Beijing’s top central banker stated, “China had agreed not to devalue its currency to support its exporters.” Shares of Boeing contracted after a 737 operated by an Ethiopian airline crashed when taking off from the capital of Addis Ababa on Sunday. U.S. consumers ramped up their spending in February on durable and non-durable goods, a sign of economic growth in Q1 of 2019. The 10-year U.S. Treasury note increased 0.5 basis points and the 30-year note rose 1.4 basis points. S&P +1.25%, Dow +0.70%, NASDAQ +1.84%.

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DEMAND FOR GOVERNMENT BONDS IS GROWING AS INVESTORS weigh the Fed’s next interest-rate moves. Powell stated, “the current interest-rate setting is neutral.” The main risk to the U.S. economy is slower growth in China and Europe, which could derail U.S. economic growth. Risk assets are seeing favorable capital inflow, as inflation and prices of goods are on the uptick. Powell thinks the markets are “fairly valued” to the current economic data. Tesla will keep more car stores open, but will increase car prices by 3% to offset additional expenses. 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, Alcoa Inc. (USD) 5.95% 2/1/2037 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above) Niral Mehta (nmehta@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	Crown Castle Intl Corp. 5.25% 1/15/2023	+ 0.4%
	Teva Pharmaceuticals Fin BV 6.75% 3/1/2028	+ 0.7%
-	Petrobras Global Finance BV 8.75% 5/23/2026	-0.2%

Petrobras Global Finance BV   6.85% 6/5/2115
Teva Pharmaceuticals Fin BV   6.75% 3/1/2028
Sabine Pass Liquefaction LLC   5.875% 6/30/2026

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	-0.13%	-0.00%	1.58%	4.72%	4.04%	2.83%
Mining	-0.38%	-0.98%	-0.08%	2.20%	5.88%	1.59%
Construction	-0.12%	-0.11%	0.70%	3.67%	4.23%	2.09%
Manufacturing	-0.17%	-0.31%	1.09%	3.70%	4.98%	4.64%
Transportion, Communication, Electric/Gas	-0.18%	-0.27%	1.17%	3.05%	4.38%	3.90%
Wholesale	-0.17%	-0.29%	0.80%	3.61%	4.87%	3.40%
Retail	-0.19%	-0.51%	1.55%	4.18%	7.01%	3.75%
Finance, Insurance, Real-Estate	-0.09%	-0.13%	0.90%	4.18%	5.11%	4.59%
Services	-0.18%	-0.37%	0.99%	4.07%	5.68%	5.13%
Public Administration	0.03%	0.22%	0.90%	2.74%	2.02%	22.20%
Energy	-0.39%	-0.81%	-0.07%	2.33%	5.75%	1.71%

Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
(None Current 03/11/2019)	1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q1 2019 2. Starwood Property Trust Inc: $300M senior notes, Expected Q1 2019 3. Calpine Corp.: $1.4B bonds, Expected Q1 2019

Additional Commentary

NEW ISSUANCE WATCH: on 3/8/19 participants welcome a $400MM new corporate-bond offering by
Intl. Airport Finance SA. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/8/19, with a net outflow of $1.69B, year-to-date $7.8B flowed into high-yield.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14) Hertz Corp. (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:

MYOB LTD, Dell International, Amer Sports Corp., Orchid Orthopedic Solutions, Neustar Inc

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 16 bp (basis points), as of 03/11/19
Net positive capital flows into high-yield ETFs & mutual funds

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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