Market Summaries

High Yield Bond Research - May 8, 2019

Written by Andrew Robartes | May 8, 2019 9:22:45 PM
U.S. STOCKS STABILIZED ON Wednesday after two consecutive days of losses. The Dow Jones closed up 0.01% with the other two major indices falling for the third straight day. On the treasury side, there is some optimism regarding a trade deal between the U.S. and China which has decreased demand for U.S. treasuries, causing their yields to increase. 10-Year U.S. Treasury Notes rose 2.5 basis points.  S&P -0.16%, Dow +0.01% , NASDAQ -0.26%.
 
 
IN THE CORPORATE BOND MARKET, Bristol-Myers Squibb Co. priced $19B worth of senior unsecured notes. The American pharmaceutical company intends to use the proceeds to fund the acquisition of Celgene Corporation. The notes were issued in nine different tranches ranging from $750MM to $3.75B. This acquistion, which is expected to close in Q3 of 2019, will expand Bristol-Myers pipeline of drugs and give them more negotiating power with insurance companies. 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, T-Mobile USA Inc. (USD) 6% 3/1/2023 made analysts' 'Conviction Buy' lists. (See the chart for T-Mobile USA Inc. (USD) 6% 3/1/2023 below.) Andrew Robartes (arobartes@advantagedata.com).
 
Key Gainers and Losers Volume Leaders
+   Petrobras Global Finance BV 8.75% 5/23/2026 + 0.2%
  US Steel Corp. 6.875% 8/15/2025 + 1.4%
-   Wachovia Capital Trust III FLT% 3/15/2042 -0.5%
Weatherford Intl LTD   8.25% 6/15/2023
Sprint Nextel Corp.   6% 11/15/2022
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.20% 0.24% 1.27% 4.82% 8.03% 9.45%
Mining -0.10% -0.72% 0.50% 2.57% 8.84% 3.82%
Construction -0.15% -0.31% 0.76% 3.89% 7.78% 5.46%
Manufacturing -0.02% -0.23% 0.84% 3.62% 7.88% 6.67%
Transportion, Communication, Electric/Gas -0.05% -0.19% 0.99% 4.55% 7.93% 6.98%
Wholesale -0.10% -0.31% 0.76% 3.51% 7.98% 5.65%
Retail -0.06% 0.16% 2.18% 5.41% 10.54% 8.43%
Finance, Insurance, Real-Estate -0.02% -0.14% 0.80% 3.48% 7.91% 6.82%
Services -0.07% -0.25% 0.39% 3.14% 7.95% 7.51%
Public Administration 0.22% 0.64% 1.05% 3.95% 6.87% 12.37%
Energy -0.10% -0.71% 0.78% 2.64% 8.69% 3.23%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

1. Eagle Holding Co II LLC (USD) 7.75% 5/15/2022 144A (05/08/2019): 900MM Unsecured Notes, Price at Issuance 99, Yielding 8.13%.

2. Service Corp. Intl. (USD) 5.125% 6/1/2029 (05/08/2019): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.13%.

1. General Electric Distributed Power: $600M high-yield bonds, Expected Q2 2019

2. Starwood Property Trust Inc: $300M senior notes, Expected Q2 2019

Additional Commentary

NEW ISSUANCE WATCH: on 5/08/19 participants welcome a $350MM new corporate-bond offering by United Continental Holdings Inc.  The most recent data showed money flowed into high-yield ETFs/mutual funds for the week ended 5/03/19, with a net inflow of $21.3MM, year-to-date $13.9B 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)
Road King Infrastructure LTD (5Y Sen USD CR14)
Cable & Wireless Communication (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, 
notable secondary activity: 
  • Broadcom LTD, Verifone Inc., Twin River Management Group Inc., Lonsdale Finance Pty 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 15 bp (basis points), as of 05/08/19
  • Net positive capital flows into high-yield ETFs & mutual funds 

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