High Yield Bond Research - May 13, 2019

STOCKS PLUMMETED MONDAY MORNING as China retaliated with movements to raise tariffs on $60 billion worth of U.S. goods. Starting June 1, Chinese officials say tariffs will be raised to as high as 25%on products that currently face levies of 5-10%. All three major indices dropped at least 2% amid the continued trade tensions, with the NASDAQ falling 3.41%. Crude Oil was down 1.3%. S&P -2.41%, Dow-2.38%, NASDAQ -3.41%.

INCREASED DEMAND FOR SAFER ASSETS caused a large dip in 10-Year U.S. Treasury yields, which sank 6.3 basis points to 2.405%. Treasury Yields, which have been falling since trade tensions with China escalated last week, are at their lowest since March. With respect to the U.S.-China trade uncertainty, Ian Lyngen, head of U.S. government bond strategy says “Regardless of the motive, its effect has been nervousness in the equity market and a flight-to-quality in Treasurys”. At this point, there is a focus on what China will do with U.S. government debt, and whether movement in the value of the yuan will effect this. 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, Prudential Financial Inc (USD) 6.625% 12/1/2037 made analysts' 'Conviction Buy' lists. (See the chart for ADI Inedexes above.) Andrew Robartes (arobartes@advantagedata.com).

Key Gainers and Losers	Volume Leaders
+   First Niagara Financial Group 6.75% 3/19/2020 + 0.3%   Goodyear Tire & Rubber Co. 5% 5/31/2026 + 0.0% -   Petrobras Global Finance BV 7.375% 1/17/2027 -0.4%	Weatherford Intl LTD   5.95% 4/15/2042 Teva Pharmaceuticals Fin BV   6% 4/15/2024

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.01% -0.94% -0.37% 3.03% 5.77% 7.58% Mining -0.09% -0.75% -0.34% 2.12% 8.27% 2.79% Construction 0.02% -0.59% 0.57% 4.50% 8.32% 5.62% Manufacturing -0.02% -0.51% 0.34% 3.33% 7.39% 6.53% Transportion, Communication, Electric/Gas -0.04% -0.46% 0.51% 4.06% 7.50% 6.77% Wholesale -0.08% -0.35% 0.50% 3.07% 7.81% 5.28% Retail -0.07% -0.55% 1.79% 4.70% 10.25% 7.91% Finance, Insurance, Real-Estate -0.04% -0.39% 0.34% 3.26% 7.58% 6.69% Services -0.03% -0.40% 0.20% 3.06% 7.70% 7.32% Public Administration -0.06% -0.07% 0.45% 2.95% 5.64% 9.83% Energy -0.14% -0.84% -0.13% 2.11% 8.01% 2.22%   Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
(None Current 05/13/2019)	1. Harsco Corp.: Unsecured Debt, Expected Q3 2019 2. General Electric Distributed Power: $600M high-yield bonds, Expected Q2 2019

NEW ISSUANCE WATCH: on 5/10/19 participants welcome a $190MM new corporate-bond offering by Williams Scotsman International Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/10/19, with a net outflow of $212MM, year-to-date $13.6B 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: 

• Oryx Midstream, Hargray Communications Group Inc., Rikshem AB, Broadcom LTD

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 11 bp (basis points), as of 05/13/19
• Net positive capital flows into high-yield ETFs & mutual funds 

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