High Yield Bond Research - March 4, 2019

Written by Corey Mahoney | Mar 4, 2019 10:11:18 PM

EQUITIES TUMBLE AS INVESTORS BECOME SKEPTICAL on initial reports that the U.S. and China are nearing a landmark deal. Negotiations are nearing an agreement which will cause the U.S. to reduce tariffs on $200 billion of Chinese goods. As part of the deal, China is expected to accelerate purchases on U.S. goods and the U.S. desires the ability to re-initiate tariffs if talks on intellectual property fall apart. The 10-year U.S. Treasury note lost 2.6 basis points. S&P -0.39%, Dow -0.79%, NASDAQ -0.23%

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TREASURY YIELDS WERE PUSHED LOWER while prices rose as investors fled to safe-haven assetsamid additional weak economic data. Construction spending suddenly declined in December finishing the year up 4.1 percent, the worst reading since 2011. N-component Netflix, of the FAANG group, will soon have a new competitor as AT&T’s buyout of Time Warner is official. The organization will be restructured and overhauled giving it “agility and flexibility” allowing the company to be a fierce competitor in the streaming service market, AT&T dipped 2.74%. Crude prices surged 25% in the first two months of 2019 subsequently the result of OPEC members slashing output in 2019. Saudi Arabia lowered production by 400,000 barrels a day accounting for half of the output lost and in March output in Saudi Arabia is expected to slip below 10 million barrels per day. 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, AT&T Inc. (USD) 4.5% 5/15/2035 made analysts' 'Conviction Buy' lists. (See the chart for AT&T Inc. below). Corey Mahoney (cmahoney@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	Altice SA 7.75% 5/15/2022 144A	+ 0.3%
	Bombardier Inc. 7.75% 3/15/2020 144A	+ 0.4%
-	Staples Inc. 8.5% 9/15/2025 144A	-1.5%

California Resources Corp. 8% 12/15/2022 144A
Communications Sales & Leasing Inc. 7.125% 12/15/2024

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.21%	0.98%	1.21%	5.27%	3.94%	2.30%
Mining	-0.16%	-0.34%	0.81%	3.07%	6.96%	1.94%
Construction	0.05%	0.18%	1.21%	3.96%	4.71%	2.50%
Manufacturing	0.02%	0.37%	1.64%	3.97%	5.41%	4.60%
Transportion, Communication, Electric/Gas	-0.02%	0.56%	1.68%	3.40%	4.72%	4.54%
Wholesale	0.03%	0.45%	1.42%	3.79%	5.48%	3.55%
Retail	0.07%	0.16%	1.78%	3.83%	6.48%	3.28%
Finance, Insurance, Real-Estate	-0.05%	0.21%	1.23%	4.14%	5.18%	4.49%
Services	-0.01%	0.35%	1.58%	3.85%	5.82%	4.70%
Public Administration	0.03%	0.20%	0.91%	2.73%	1.81%	22.19%
Energy	-0.16%	-0.34%	0.81%	3.21%	6.55%	2.01%

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

New Issues	Forward Calendar
1. CNX Resources Corp. (USD) 7.25% 3/14/2027 144A (03/04/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%. 2. CNX Resources Corp. (USD) 7.25% 3/14/2027 Reg S (03/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%.	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

New Issues

Forward Calendar

1. CNX Resources Corp. (USD) 7.25% 3/14/2027 144A (03/04/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%.

2. CNX Resources Corp. (USD) 7.25% 3/14/2027 Reg S (03/04/2019): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.25%.

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 3/4/19 participants welcome a $500MM new corporate-bond offering by
CNX Resources Corp. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 2/22/19, with a net inflow of $0.69B, year-to-date $9.7B flowed into high-yield.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD XR14) Hovnanian Enterprises Inc. (5Y Sen USD MR14)	SuperValu Inc. (5Y Sen USD XR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Amer Sports Corp., Orchid Orthopedic Solutions, Neustar Inc, Minotaur Acquisition Inc.

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 03/04/19
Net positive capital flows into high-yield ETFs & mutual funds

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