High Yield Bond Research - October 22, 2019

Written by Andrew Robartes | Oct 22, 2019 9:10:59 PM

US STOCKS FELL SLIGHTLY TODAY amid European headlines regarding Brexit. Additionally, McDonald’s missed earnings expectations in a mixed third quarter and saw shares dip 5%. The 10-year Treasury note declined 3.7 bps. S&P -0.36%, DOW -0.15%, NASDAQ -0.72%

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IN THE CORPORATE BOND SPACE, Netflix, Inc. (NFLX) priced $2 billion worth of senior unsecured notes due in 2030. The American streaming service will use the proceeds from these junk-rated bonds to finance new content, and potential acquisitions. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bonds. High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Ford Motor Co. (USD) 4.346% 12/8/2026 made analysts' 'Conviction Buy' list. (See the chart below for ADI Indices above) Andrew Robartes

Key Gainers and Losers

Volume Leaders

+	Teva Pharmaceuticals Fin BV 6.75% 3/1/2028	+ 0.1%
	Oasis Petroleum Inc. 6.875% 1/15/2023	+ 0.2%
-	Netflix Inc. 4.875% 4/15/2028	-2.4%
	Antero Resources Corp. 5.125% 12/1/2022	-1.7%

Ally Financial Inc. 4.125% 3/30/2020
Oasis Petroleum Inc. 6.875% 1/15/2023

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	-0.01%	0.21%	1.53%	3.53%	17.52%	16.75%
Mining	-0.08%	-0.09%	-3.90%	-2.73%	4.77%	-1.07%
Construction	0.07%	0.58%	1.26%	3.79%	15.15%	13.40%
Manufacturing	0.05%	0.54%	0.34%	2.12%	11.74%	9.53%
Transportion, Communication, Electric/Gas	0.01%	0.26%	0.42%	2.34%	13.41%	10.39%
Wholesale	-0.03%	0.19%	-0.10%	1.10%	11.70%	8.70%
Retail	0.06%	0.62%	0.64%	2.23%	15.16%	12.05%
Finance, Insurance, Real-Estate	0.05%	0.47%	0.45%	2.52%	12.78%	10.81%
Services	0.07%	0.48%	0.40%	2.45%	12.58%	10.43%
Public Administration	-0.98%	-0.68%	-0.30%	1.88%	12.37%	14.47%
Energy	-0.10%	-0.21%	-3.18%	-1.98%	5.82%	0.25%

Total returns (non-annualized) by rating, market weighted.

New Issues	Forward Calendar
1. United Rentals Inc. (USD) 3.875% 11/15/2027 (10/21/2019): 750MM Second Lien Notes, Price at Issuance 100, Yielding 3.88%. 2. Netflix Inc. (USD) 4.875% 6/15/2030 Reg S (10/22/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.	1. Calpine Corp.: $1.4B bonds, Expected Q4 2019 2. Presidio Inc.: $1.775B high yield bonds, Expected 4th Quarter 2019

New Issues

Forward Calendar

1. United Rentals Inc. (USD) 3.875% 11/15/2027 (10/21/2019): 750MM Second Lien Notes, Price at Issuance 100, Yielding 3.88%.

2. Netflix Inc. (USD) 4.875% 6/15/2030 Reg S (10/22/2019): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

1. Calpine Corp.: $1.4B bonds, Expected Q4 2019

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

Additional Commentary

NEW ISSUANCE WATCH: on 10/22/19 participants welcome a $1B new corporate-bond offering by
Netflix 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 XR14) Weatherford International LTD (5Y Sen USD MR14)	SuperValu Inc. (5Y Sen USD MR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

McDermott International Inc., Live Nation Entertainment Inc., Berry Plastics Corp.

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 28 bp (basis points), as of 10/22/19
Net positive capital flows into high-yield ETFs & mutual funds

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

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