Investment Grade Bond Research - April 24, 2019

INVESTMENT-GRADE DEBT EDGED OUT JUNK BONDS in net prices linked to actual trades as investors purchase safe-haven assets. Treasury yields dip on soft global economic data stirring up anxiety among investors. The spread between the two and 10-year widened to 21.5 basis points. The 10-year note sank 5.0 basis points. S&P -0.03%, DOW -0.10%, NASDAQ -0.02%.

U.S. MORTGAGE APPLICATIONS DECLINE to post their largest drop in four months as mortgage rates increased to one-month highs.  “The strong economy and job market (are) keeping buyer interest high, but rising mortgage rates could add pressure to the budgets of some would-be buyers,” MBA’s chief economist Mike Fratantoni said in a statement.  June delivery of crude declined 0.77 percent following a report U.S. crude supplies rose by 6.9 million barrels last week; In addition, gasoline inventories rose by 2.2 million barrels.  Domestic crude inventories hit an 18-month high settling lower at $74.37 per barrel. “Overall the report was considered bearish,” said Kyle Cooper, a consultant at ION Energy. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds.  High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,   Kraft Heinz Co (USD) 5.2% 7/15/2045 made analysts' 'Conviction Buy' lists. (See the chart for  Kraft Heinz Co bonds below) Corey Mahoney cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Apple Inc. 2.4% 5/3/2023 + 0.0%   Deutsche Bank AG 3.375% 5/12/2021 (1) + 0.6% -   Occidental Petroleum Corp. 4.2% 3/15/2048 -0.1%	Apple Inc.   2.4% 5/3/2023 GE Capital Intl. Funding Co.   3.373% 11/15/2025

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.28% -0.20% 0.15% 3.71% 4.23% 4.63% Mining -0.02% 0.00% 0.70% 4.18% 5.93% 5.66% Construction 0.04% 0.21% 0.49% 3.56% 4.21% 5.01% Manufacturing 0.05% 0.02% 0.33% 3.32% 4.07% 4.74% Transportion, Communication, Electric/Gas 0.04% 0.15% 0.66% 4.52% 5.45% 6.31% Wholesale 0.05% 0.07% 0.42% 3.72% 4.90% 4.90% Retail 0.05% -0.01% 0.21% 3.48% 4.18% 5.21% Finance, Insurance, Real-Estate 0.09% 0.13% 0.35% 3.07% 3.77% 5.40% Services 0.08% -0.08% 0.13% 2.94% 3.82% 5.59% Public Administration 0.04% 0.12% 0.04% 1.14% 1.08% 3.76% Energy -0.01% -0.03% 0.61% 4.32% 5.96% 6.15%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Kimberly-Clark Corp. (USD) 3.2% 4/25/2029 (04/23/2019): 700MM Senior Unsecured Notes, Price at Issuance 99.83, Yielding 3.22%. 2. Rogers Communications Inc. (CAD) 3.25% 5/1/2029 (04/23/2019):1000MM Senior Unsecured Notes, Price at Issuance 99.746, Yielding 3.28%. 3. JBS USA LLC (USD) 5.875% 7/15/2024 (04/24/2019): 150MM Senior Unsecured Notes, Price at Issuance 101.75, Yielding 5.48%.

NEW ISSUANCE WATCH: on 4/23/19 participants welcome a $700MM new corporate-bond offering by
Kimberly-Clark Corp.  The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 4/18/19, with a net inflow of $1.1B, year-to-date $14.4B flowed into high-yield.

 

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	Cable & Wireless Communication (5Y Sen USD CR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Prysmian, Project Maple II BV, Trade Me Group LTD, Jane Street, Six Flags 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 15 bp (basis points), as of 04/24/19
• Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

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.