High Yield Bond Research - May 22, 2019

Posted by Andrew Robartes on May 22, 2019 5:04:53 PM
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U.S. STOCKS DECLINED WEDNESDAY after the Federal Reserve indicated it will hold off on an interest rate change. Voting member of the Fed James Bullard stated, “Rates are at a good place in the U.S. right now, if anything we are a little restrictive I would say”. The Fed was in agreement that the current policy can stay, but was split on whether it would change if the economy continues on its expected path. Combined with persisting tariff tensions, all three major indices fell today. S&P -0.28%, DOW -0.39%, NASDAQ -0.45%. 
TARGET CORP. SHARES ROSE ALMOST 10% before closing up 7.71% following a report of better-than-expected sales, revenue and earnings per share. Target CEO Brian Cornell attributes recent success to “investing in their business” and “adapting to this new omnichannel environment”. The retail giant has recently put money into adding more delivery options, including next day delivery and curbside pickupADI 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, Home Depot Inc. (USD) 2.8% 9/14/2027 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Andrew Robartes (arobartes@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Enbridge Inc. VAR% 3/1/2089 + 0.1%
  Western Digital Corp. 4.75% 2/15/2026 + 2.3%
-   Sprint Capital Corp. 6.875% 11/15/2028 -1.4%
Pacific Gas & Electric Co.   6.05% 3/1/2034
Goodyear Tire & Rubber Co.   5% 5/31/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.19% 0.43% -1.04% 2.61% 5.86% 7.66%
Mining 0.05% -0.04% -1.29% 1.33% 8.52% 2.69%
Construction 0.09% 0.06% -0.02% 3.43% 7.88% 6.08%
Manufacturing 0.13% 0.02% -0.42% 2.26% 7.29% 5.97%
Transportion, Communication, Electric/Gas 0.08% 0.30% 0.07% 3.27% 7.65% 7.64%
Wholesale 0.12% 0.22% 0.29% 2.68% 8.45% 5.87%
Retail 0.11% -0.02% 0.45% 4.15% 10.28% 9.77%
Finance, Insurance, Real-Estate 0.16% 0.11% 0.02% 2.78% 7.88% 7.15%
Services 0.18% 0.31% 0.25% 2.45% 8.00% 7.49%
Public Administration -0.19% 0.02% 0.53% 2.98% 6.69% 13.23%
Energy 0.07% -0.06% -1.35% 1.50% 8.25% 2.29%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-05-22T170318.586

New Issues Forward Calendar

1. Eldorado Gold Corp. (USD) 9.5% 6/1/2024 144A (05/22/2019):300MM Second Lien Notes, Price at Issuance 98, Yielding 10.01%.

2. Builders FirstSource Inc. (USD) 6.75% 6/1/2027 144A (05/22/2019): 400MM Secured Notes, Price at Issuance 100, Yielding 6.75%.

1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q2 2019

2. Diamondback Energy Inc.: High-yield notes, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 5/22/19 participants welcome a $400MM new corporate-bond offering by Builders FirstSource Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/17/19, with a net outflow of $2.6B, year-to-date $11.0B flowed into high-yield.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD XR14)
Weatherford International LTD (5Y Sen USD MR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Lucid Energy Group LLC, Southern California Edison Co., Horizon Pharma 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 16 bp (basis points), as of 05/22/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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Topics: Investment Grade, Loans, Analytics, bonds, junk bonds, bond market, market analytics, New Issues, News, Syndicated Bonds, syndicated, research, market update

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