High Yield Bond Research - October 17 2019

Posted by Corey Mahoney on Oct 18, 2019 12:40:25 PM
U.S. MANUFACTURING DECLINED IN SEPTEMBER as the global economic slowdown starts to take a toll on the economy. Overall production slipped 0.4 percent largely due to a pullback in the mining sector. Homebuilding follows suit retreating from 12 year-highs as housing starts fall 9.4 percent. “It inches them forward to taking out a little more insurance to help support the economy that continues to face the headwinds of reduced world trade from tariffs.”
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JOBLESS CLAIMS RISE MARGINALLY IN OCTOBER ticking higher by 4,000 applications during the week end of October 11th.  A General Motors strike caused a slight increase of claims in Ohio and Michigan however, the impact won’t be seen until the end of the month. United Auto Workers, the General Motors Union delivered a tentative deal including the closure of multiple U.S. plants and a “ratification” bonus to union members. High-yield edged out high-grade. Among high-grade bonds showing topmost price gains at appreciable volumes traded,  L Brands Inc. (USD) 6.875% 11/1/2035 analysts' 'Conviction Buy' list (See the chart below for L Brands Inc. bonds.) Corey Mahoney

Key Gainers and Losers Volume Leaders
+   Gulfport Energy Corp. 6.625% 5/1/2023 + 8.0%
  General Motors Co. 5.2% 4/1/2045 + 0.9%
-   ArcelorMittal SA 6.125% 6/1/2025 -0.2%
  Unit Corp. 6.625% 5/15/2021 -0.0%
Gulfport Energy Corp.   6.625% 5/1/2023
Intelsat Luxembourg SA   8.125% 6/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% 0.54% 1.52% 3.11% 17.33% 16.99%
Mining -0.02% 0.59% -4.61% -4.46% 4.32% -1.43%
Construction 0.03% 0.37% 1.13% 3.29% 15.06% 12.91%
Manufacturing 0.16% 0.52% 0.39% 1.70% 11.13% 8.52%
Transportion, Communication, Electric/Gas -0.00% 0.39% 0.39% 2.29% 13.26% 10.00%
Wholesale -0.04% 0.30% -0.02% 1.09% 11.65% 8.62%
Retail 0.19% 0.77% 0.62% 1.95% 15.16% 11.90%
Finance, Insurance, Real-Estate 0.06% 0.29% 0.44% 2.29% 12.78% 10.53%
Services 0.08% 0.49% 0.50% 2.46% 12.62% 10.25%
Public Administration 0.12% 0.12% 0.59% 2.67% 13.34% 15.08%
Energy -0.06% 0.29% -3.69% -3.78% 5.45% -0.03%
Total returns (non-annualized) by rating, market weighted.

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New Issues Forward Calendar

1. CCO Holdings LLC (USD) 4.75% 3/1/2030 (10/16/2019): 500MM Senior Unsecured Notes, Price at Issuance 101.25, Yielding 4.6%.

2. Motion Bondco Designated Activity Company (USD) 6.625% 11/15/2027 Reg S (10/16/2019): 410MM Secured Notes, Price at Issuance 100, Yielding 6.63%.

1. Qmax Financial Holdings Inc.: $225MM, Expected 4th Quarter 2019

2. Presidio Inc.: $1.775B high yield bonds, Expected 4th Quarter 2019

Additional Commentary

NEW ISSUANCE WATCH: on 10/11/19 participants welcome a $300M new corporate-bond offering by
Truckpro Inc. The most recent data showed a money flowed out of highyoutflow ETF/mutual funds for the week ended 9/27/2019, with a net outflow of $258 million.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14)
Hertz Corp. (5Y Sen USD CR14)
Ghana, Republic of (5Y Sen USD CR14)
Export Credit Bank of Turkey (5Y Sen USD CR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Live Nation Entertainment Inc., Berry Plastics Corp., Raytheon Co., Shearer's Foods 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 35 bp (basis points), as of 10/17/19
  • 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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