Investment Grade Bond Research - August 7, 2019

US STOCKS FELL THEN ROSE TODAY, as investors fled into the safety of bonds. The falling bond yields resulted in stocks ending the day near level with this morning. Similarly, the 10-Year Treasury note dropped to as low as 1.598%, but is currently up 2.6 basis points at 1.734%. S&P +0.08%, DOW -0.09%, NASDAQ +0.38%

IN THE CORPORATE BOND SPACE, Occidental Petroleum Corp. recently priced $13 billion in senior unsecured notes to fund the acquisition of Anadarko Petroleum. Amidst, economic uncertainty, investors flocked to the offering. The bonds, which were issued in 10 different parts, have yields ranging from 2.6% to 4.4%, and maturities ranging from 1 to 30 years. 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, Microsoft Corp. (USD) 3.75% 5/1/2043 made analysts' 'Conviction Buy' lists. (See the chart for Microsoft Corp. below) Andrew Robartes

 

Key Gainers and Losers	Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 1.5%   Anthem Inc. 4.375% 12/1/2047 + 1.3%   General Electric Co. FLT% PERP (1) + 0.7% -   Ford Motor Co. 5.291% 12/8/2046 -3.5%   Wells Fargo & Co. 3.75% 1/24/2024 -0.1%   Ford Motor Credit Co. 5.113% 5/3/2029 -0.2%	CVS Health Corp.   5.05% 3/25/2048 Anthem Inc.   4.375% 12/1/2047 General Electric Co.   FLT% PERP (1)

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.12% 0.93% 0.37% 3.35% 9.38% 9.18% Mining 0.14% 1.22% 1.18% 4.54% 11.11% 9.82% Construction -0.02% 1.48% 1.83% 5.30% 9.45% 9.65% Manufacturing 0.09% 1.27% 1.60% 5.08% 9.50% 8.71% Transportion, Communication, Electric/Gas 0.15% 1.91% 2.29% 6.57% 12.43% 12.47% Wholesale 0.07% 1.01% 1.38% 4.59% 10.32% 9.39% Retail 0.07% 1.50% 1.86% 5.73% 10.46% 10.00% Finance, Insurance, Real-Estate 0.06% 1.02% 1.33% 3.93% 8.03% 8.51% Services 0.10% 1.39% 1.57% 5.26% 9.52% 9.73% Public Administration 0.02% 0.75% 0.82% 2.47% 4.10% 5.69% Energy 0.14% 1.27% 1.27% 4.72% 11.45% 11.47%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. UDR Inc. (USD) 3% 8/15/2031 (08/06/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.71, Yielding 3.03%. 2. PPG Industries Inc. (USD) 2.8% 8/15/2029 (08/06/2019): 300MM Senior Unsecured Notes, Price at Issuance 99.732, Yielding 2.83%. 3. Occidental Petroleum Corp. (USD) 3.137% 2/8/2021 (08/07/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.14%.

NEW ISSUANCE WATCH: on 8/07/19 participants welcome $300 million in new corporate-bond offerings by Wisconsin Public Service Corp. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 8/2/19, with a net outflow of $115 MM, $1.3 billion outflow the prior week.

 

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (5Y Sen USD MR14) Weatherford International LTD (5Y Sen USD MR14) Hovnanian Enterprises Inc. (5Y Sen USD MR14)	Road King Infrastructure LTD (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Albertsons LLC, Helical PLC, London Stock Exchange Group PLC, Maxamcorp Holding SL

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 16 bp (basis points), as of 08/07/19
• Net positive capital flows into high-yield ETFs & mutual funds

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