Market Summaries

High Yield Bond Research - March 13, 2019

Written by Corey Mahoney | Mar 13, 2019 9:09:12 PM
JUNK BONDS GAINED AGAINST ITS INVESTMENT-GRADE counterparts in net prices linked to actual trades as appetites for risk improve.  Durable goods orders increased in January lifted by a surge in orders for commercial aircraft and commercial transportation vehicles. The 10-year U.S. Treasury note gained 0.8 basis points and the 30-year note rose 0.2 basis points.  S&P +0.78%, Dow +0.56%, NASDAQ+0.78% 
 

 

BROOKFIELD ASSET MANAGEMENT IS BUYING A 62% MAJORITY STAKE in Oaktree Capital Management which will diversify Brookfield’s investments branching into distressed debt.  Brookfield Chief Executive Bruce Flatt announced, “This transaction enables us to broaden our product offering to include one of the finest credit platforms in the world, which has a value-driven investment style, consistent with ours.”  The two firms combined will have an industry-leading $475 billion in assets.Delivery of April West Texas intermediate rallied 2.73% upon U.S. supplies abruptly dipping, settling at $58.41 per barrel.   Exports from production Venezuela have stalled due to a widespread power outagewith no immediate signs of restoration. 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, L Brands Inc. (USD) 6.875% 11/1/203 made analysts' 'Conviction Buy' lists. (See the chart for L Brands below) Corey Mahoney cmahoney@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   California Resources Corp. 8% 12/15/2022 144A + 2.8%
  Murray Energy Corp. 11.25% 4/15/2021 144A + 1.3%
-   Tapstone Energy LLC 9.75% 6/1/2022 144A -14.5%
Sunoco LP   6% 4/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.36% 0.15% 2.12% 5.29% 4.42% 3.30%
Mining 0.27% -0.39% 0.05% 2.69% 6.35% 1.36%
Construction 0.15% 0.09% 0.61% 4.11% 4.90% 2.79%
Manufacturing 0.18% -0.06% 1.00% 3.86% 5.34% 4.62%
Transportion, Communication, Electric/Gas 0.21% 0.13% 1.17% 3.44% 4.82% 4.65%
Wholesale 0.11% -0.06% 0.75% 3.69% 5.13% 3.56%
Retail 0.16% 0.03% 1.52% 4.20% 7.22% 2.69%
Finance, Insurance, Real-Estate 0.16% 0.15% 0.95% 4.32% 5.44% 4.86%
Services 0.14% -0.13% 0.93% 4.13% 5.99% 5.40%
Public Administration 0.03% 0.21% 0.91% 2.72% 2.14% 22.20%
Energy 0.26% -0.23% 0.22% 2.90% 6.20% 1.80%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

1. Sunoco LP (USD) 6% 4/15/2027 Reg S (03/12/2019): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.

2. Frontier Communications Corp. (USD) 8% 4/1/2027 Reg S (03/13/2019): 1650MM First Lien Notes, Price at Issuance 100, Yielding 8%.

1. Starwood Property Trust Inc: $300M senior notes, Expected Q1 2019

2. Calpine Corp.: $1.4B bonds, Expected Q1 2019

Additional Commentary

NEW ISSUANCE WATCH: on 3/13/19 participants welcome a $1650MM new corporate-bond offering by
Frontier Communications Corp. 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)
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)

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 03/13/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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