High Yield Bond Research - May 31, 2019

Posted by Corey Mahoney on May 31, 2019 5:21:07 PM
SAFE-HAVEN ASSETS SOARED WHILE EQUITIES TUMBLED ON FRIDAY following the White House announcing tariffs on Mexican goods.  The 10-year note plummeted 8.2 basis points, shedding 18 basis points this past week slipping to 20-month lows. JPMorgan predicts there will be two interest rate cuts by the end of the year given the new tariff threats. S&P -1.32%, DOW +1.41, NASDAQ -1.51%.
 NEW TARIFFS WILL HINDER THE U.S. AUTO INDUSTRY substantially increasing the cost of cars.  On June 10th the US will implement a 5 percent tariff and gradually raise to it 25 percent by October.  US households spent less in April than the previous month however the economy is still on solid ground, overall data is “predominantly positive for the economy”. FedEx announced the logistics giant will start to offer Sunday delivery as consumer online shopping habits demand orders sooner.  The company intends to rely less on the US post office reducing its outsourcing. 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, Southern California Edison Company (USD) 6.65% 4/1/2029 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Corey Mahoney (cmahoney@advantagedata.com).
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 6.05% 3/1/2034 + 1.3%
  Dish DBS Corp. 5.875% 11/15/2024 + 2.2%
-   Teva Pharmaceutical Industries LTD 2.2% 7/21/2021 -0.8%
Teva Pharmaceutical Industries LTD   2.8% 7/21/2023
Chesapeake Energy Corp.   8% 1/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.09% 0.21% -0.84% 0.62% 5.06% 5.30%
Mining 0.05% -0.48% -2.75% -0.16% 7.02% 1.74%
Construction 0.03% -0.09% -0.32% 2.88% 8.10% 6.58%
Manufacturing 0.05% -0.32% -1.10% 1.29% 6.94% 5.81%
Transportion, Communication, Electric/Gas 0.07% 0.05% -0.30% 2.43% 7.63% 7.51%
Wholesale 0.05% -0.08% -0.40% 1.53% 7.71% 5.47%
Retail 0.06% -0.14% -0.90% 1.49% 7.80% 4.27%
Finance, Insurance, Real-Estate 0.06% -0.06% -0.36% 2.02% 7.76% 7.40%
Services 0.06% -0.11% -0.27% 1.77% 7.94% 7.76%
Public Administration 0.12% -0.29% 0.74% 1.70% 6.97% 13.28%
Energy 0.04% -0.60% -2.65% 0.16% 6.88% 1.52%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-05-31T171903.302

New Issues Forward Calendar

1. CNO Financial Group (USD) 5.25% 5/30/2029 (05/30/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%.

2. Go Daddy Operating Co. LLC (USD) 5.25% 12/1/2027 144A (05/31/2019): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%.

1. Nexstar Media Group Inc.: Possible new bonds, Expected Q3 2019

2. Harsco Corp.: Unsecured Debt, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 5/31/19 participants welcome a $600MM new corporate-bond offering by Go Daddy Operating Co.. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/24/19, with a net inflow of $4MM, year-to-date $11.0B 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)
Atmos Energy Corp. (5Y Sen USD MR14)

unnamed - 2019-05-28T172102.935

Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Tundra Energy Marketing , Louis Dreyfus Corp., Service Corp. Intl., Lucid Energy Group LLC
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 05/31/19
  • 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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