Investment Grade Bond Research - April 17, 2019

JUNK BONDS SLIGHTLY EDGED OUT INVESTMENT-GRADE DEBT in net prices linked to actual trades.  Equities slip as healthcare stocks took a significant hit on Wednesday amid the developing political environment surrounding healthcare.  UnitedHealth plummeted 7 percent in the past two days alone despite an earnings beat on Tuesday.  10-year Treasury note rose 0.2 basis points S&P -0.19%, DOW+0.06%, NASDAQ -0.05%

U.S. TRADE DEFICIT CONTRACTS TO AN EIGHT MONTH LOW in February as imports from China narrowed 3.4 percent.  Economist suspect a trade deficit will remain high, “Even if trade negotiations are resolved in such a way as to reduce the bilateral trade deficit with China…[it] would likely divert trade flows to other countries”.  The labor market remains strong, “Wages grew moderately in most districts for both skilled and unskilled workers, with only three reporting slight growth in workers’ pay”.  Pinterest is targeting an IPO price of $19 a share and will begin trading on Thursday $2 above the high end of the range. 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, Albertsons Inc (USD) 7.45% 8/1/2029 made analysts' 'Conviction Buy' lists. (See the chart for ADI indices above.) Corey Mahoney cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   GE Capital Intl. Funding Co. 4.418% 11/15/2035 + 0.0%   Comcast Corp. 4.7% 10/15/2048 + 0.7% -   Bank of America Corp. 3.124% 1/20/2023 -0.1%	JPMorgan Chase & Co.   3.964% 11/15/2048 CVS Health Corp.   4.1% 3/25/2025

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.30% 0.03% 1.16% 4.34% 4.45% 4.44% Mining -0.15% 0.14% 1.72% 4.73% 5.83% 4.56% Construction -0.14% -0.21% 1.05% 3.46% 3.59% 4.33% Manufacturing -0.10% 0.01% 1.27% 3.78% 4.04% 3.95% Transportion, Communication, Electric/Gas -0.13% -0.02% 1.77% 4.89% 5.19% 5.15% Wholesale -0.04% 0.13% 1.24% 4.15% 4.85% 4.20% Retail -0.07% -0.03% 1.24% 4.02% 4.19% 4.25% Finance, Insurance, Real-Estate -0.10% -0.05% 0.81% 3.21% 3.49% 4.56% Services -0.07% -0.02% 1.20% 3.63% 3.94% 4.70% Public Administration -0.06% -0.12% 0.26% 1.00% 0.95% 3.25% Energy -0.19% 0.05% 1.65% 4.95% 5.89% 5.03%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. PNC Financial Services Group Inc. (USD) 3.45% 4/23/2029 (04/16/2019): 1500MM Senior Unsecured Notes, Price at Issuance 99.84, Yielding 3.47%. 2. Wal-Mart Stores Inc. (USD) 3.05% 7/8/2026 (04/16/2019): 1250MM Senior Unsecured Notes, Price at Issuance 99.868, Yielding 3.07%.

NEW ISSUANCE WATCH: on 4/17/19 participants welcome a $1500MM new corporate-bond offering by
Bank of America Corp.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/12/19, with a net inflow of $0.655B, year-to-date $13.3B 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)	Cable & Wireless Communication (5Y Sen USD CR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Project Maple II BV, Trade Me Group LTD, Jane Street, Six Flags Inc., MW Industries Inc.

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 18 bp (basis points), as of 04/17/19
• Net positive capital flows into high-yield ETFs & mutual funds

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