Market Summaries

High Yield Bond Research - March 14, 2019

Written by Corey Mahoney | Mar 14, 2019 9:22:25 PM
LONG-DATED US TREASURY YIELDS GAINED UPON GEOPOLITICAL TENSIONS around the globe. Trade talks between the U.S. and China are in a gridlock and Brexit uncertainties grow after parliament rejects a no-deal.  The White House announced there is “no rush” to finalize a trade deal, unwilling to compromise over intellectual property rights.  The 10-year U.S. Treasury note gained 0.7 basis points and the 30-year note rose 2.2 basis points.  S&P +0.08% Dow +0.07% NASDAQ +0.08%
 
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SOFT ECONOMIC DATA HIGHLIGHTS SLOWING GROWTH, the number of unemployment applications ticked higher than forecasted last week, indicating a slowing labor market.  US import prices are the latest indicator that inflation appears to be tame.  In January however, import prices jumped 0.6 percent largely due to a 5 percent increase in fuel costs.  Fixed-rate mortgages sink to 13-month lows falling in line with a decelerating housing market.  Home sales declined more than expected in January depicting a slowing market despite falling interest rates, sales plunged 6.9 percent. The supply of homes slightly increased compared to the previous month meanwhile the median price fell 3.8 percent.  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, Pacific Gas & Electric Co (USD) 6.05% 3/1/2034 made analysts' 'Conviction Buy' lists. (See the chart for Pacific Gas & Electric Co below) Corey Mahoney cmahoney@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   Endo Finance LLC 6% 7/15/2023 144A + 2.2%
  Centennial Resource Production, LLC 6.875% 4/1/2027 144A + 0.4%
-   Valeant Pharmaceuticals Intl. Inc. 8.5% 1/31/2027 144A -0.0%
Endo Finance LLC   6% 7/15/2023 144A
VRX Escrow Corp.   6.125% 4/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 0.11% 1.60% 5.13% 4.45% 3.38%
Mining 0.17% -0.11% 0.09% 2.73% 6.68% 1.41%
Construction 0.12% 0.28% 0.78% 4.16% 5.04% 2.87%
Manufacturing 0.17% 0.21% 1.12% 4.07% 5.61% 4.71%
Transportion, Communication, Electric/Gas 0.18% 0.40% 1.48% 3.67% 5.19% 4.76%
Wholesale 0.12% 0.11% 0.84% 3.79% 5.46% 3.75%
Retail 0.09% 0.09% 0.80% 4.07% 6.33% 2.55%
Finance, Insurance, Real-Estate 0.11% 0.29% 0.93% 4.42% 5.57% 5.04%
Services 0.15% 0.14% 0.90% 3.93% 5.76% 5.26%
Public Administration 0.03% 0.21% 0.90% 2.72% 2.17% 22.20%
Energy 0.17% 0.02% 0.21% 2.87% 6.47% 1.86%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

1. Arrow Bidco, LLC (USD) 9.5% 3/15/2024 144A (03/13/2019):340MM Secured Notes, Price at Issuance 99.029, Yielding 9.75%.

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 3/14/19 participants welcome a $525MM new corporate-bond offering by
Amkor Technology Inc. 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 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: 
  • XPO Logistics Inc., MYOB LTD, Dell International, Amer Sports Corp.
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 18 bp (basis points), as of 03/14/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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