High Yield Bond Research - September 11, 2019

Posted by Corey Mahoney on Sep 11, 2019 5:03:31 PM
PRODUCER PRICES ROSE IN AUGUST edging 0.1 percent higher supporting the market's expectation the Federal Reserve will cut interest rates next week. Gold closed above $1,500 for the first time since early August as the White House sparked fear, “Federal Reserve should get our interest rates down to ZERO, or less”. The 10-year note rose 0.1 basis points. S&P +0.72%, DOW +0.84, NASDAQ +1.06%.
INVESTORS PULLED $4.4 BILLION from mutual and exchange-traded funds that hold U.S. stocks during the week ended September 6. Last week marked the fourth out of five weeks of outflows amid concerns over a trade war. In addition, many investment banks are predicting the U.S. will enter a recession within the next 12 months. Year to date investors have pulled a staggering $98 billion from U.S. stock funds a clear indication of shifting strategies mitigating risk. ADI proprietary index data showed a net yield increment for high-grade versus high-yield bondsHigh-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded,  Pacific Gas & Electric Co. (USD) 3.3% 12/1/2027 made analysts' 'Conviction Buy' list (See the chart below for Pacific Gas & Electric Co  bonds below) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Teva Pharmaceutical Industries LTD 2.8% 7/21/2023 + 2.0%
  Frontier Communications Corp. 10.5% 9/15/2022 + 0.9%
-   TransDigm Inc. 6.375% 6/15/2026 -0.3%
Whiting Petroleum Corp.   6.625% 1/15/2026
Pacific Gas & Electric Co.   6.05% 3/1/2034
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.33% 0.47% 1.54% 6.48% 14.02% 16.25%
Mining 0.44% 1.14% 1.73% -1.31% 6.25% 1.05%
Construction -0.03% 0.20% 1.55% 4.17% 13.31% 10.16%
Manufacturing -0.05% 0.14% 1.17% 2.48% 10.62% 7.71%
Transportion, Communication, Electric/Gas -0.10% 0.27% 1.05% 3.58% 12.95% 9.91%
Wholesale 0.02% 0.19% 0.92% 2.60% 11.76% 7.89%
Retail -0.03% 0.48% 1.20% 2.53% 13.89% 10.46%
Finance, Insurance, Real-Estate -0.08% 0.26% 1.24% 3.73% 12.49% 10.50%
Services -0.06% 0.33% 1.46% 3.16% 11.60% 9.03%
Public Administration 0.02% -0.07% 1.03% 4.51% 12.81% 16.76%
Energy 0.34% 0.98% 1.94% -0.57% 7.37% 1.87%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-09-11T170059.189

New Issues Forward Calendar

1. Brookfield Residential Properties Inc. (USD) 6.25% 9/15/2027 144A (09/10/2019): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

2. Sensata Technologies BV (USD) 4.375% 2/15/2030 144A (09/10/2019): 450MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

1. Twinset Spa: ¬170M 5 year senior secured floating-rate notes, Expected Q3 2019

2. Calpine Corp.: $1.4B bonds, Expected Q3 2019

Additional Commentary

NEW ISSUANCE WATCH: on 09/10/19 participants welcome a $525M new corporate-bond offering by
Triumph Group Inc . The most recent data showed a significant flow into fixed income ETFs for the month of August, with a net inflow of $14.0 billion.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14)
Hertz Corp. (5Y Sen USD CR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed - 2019-09-09T165353.966

Loans and Credit Market Overview


Deals recently freed for secondary trading, 
notable secondary activity: 
  • Beazer Homes USA Inc., Murphy Oil USA Inc., Electronic Arts Inc., AutoData
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 20 bp (basis points), as of 09/11/19
  • 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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