Investment Grade Bond Research - July 1, 2019

Posted by Corey Mahoney on Jul 1, 2019 5:20:00 PM

MANUFACTURING ACTIVITY DECLINES IN JUNE to nearly a three year low indicating the trade spat with China is impacting factory output. The gauge of activity slipped to 51.7 from 52.1 marking the third straight month of deteriorating data.  Senior money market economist Thomas Simmons at Jefferies mentioned, “If the White House is able to forge a solid trade deal with China, both investment spending and manufacturing activity will again improve.”  The 10-year note advanced 2.0 basis points.  S&P +0.77%, DOW +0.44, NASDAQ +1.06%

OPEC ANNOUNCES AN EXTENSION to output cuts until March of 2020 intending to support the current prices preventing a deterioration in the future.  “Worsening tensions between the U.S. and Iran add potential for oil price volatility that could be tricky for OPEC members to manage.”  Saudi Arabia is seeking to achieve $70 per barrel oil in order to avoid a budget deficit.  Delivery of August WTI crude settled around $59.01 per barrel.  Construction spending fell 0.8 percent in May and April’s data was revised higher than previously reported.  Residential construction saw a significant dip in May contracting for the fifth consecutive quarter. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bondsHigh-yield edged out high-grade.  Among high-yield bonds showing topmost price gains at appreciable volumes traded,  Frontier Communications Corp. (USD) 8.75% 4/15/2022 made analysts' 'Conviction Buy' lists. (See the chart for ADI index above.) Corey Mahoney (
Key Gainers and Losers Volume Leaders
+   McDonald's Corp. 3.7% 1/30/2026 + 0.1%
  Vodafone Group PLC 4.375% 5/30/2028 + 0.1%
-   PepsiCo. Inc. 1.85% 4/30/2020 -0.0%
Vodafone Group PLC   4.375% 5/30/2028
Bayer US Finance LLC   4.375% 12/15/2028 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.09% 0.19% 2.32% 3.76% 8.55% 5.30%
Mining 0.04% 0.65% 2.44% 3.43% 9.25% 9.05%
Construction 0.03% 0.42% 2.07% 3.66% 8.00% 8.45%
Manufacturing 0.06% 0.44% 2.47% 3.52% 7.45% 7.66%
Transportion, Communication, Electric/Gas 0.07% 0.60% 3.04% 4.56% 9.76% 10.61%
Wholesale 0.12% 0.39% 2.07% 3.42% 8.34% 8.50%
Retail 0.04% 0.48% 2.87% 3.71% 8.33% 8.94%
Finance, Insurance, Real-Estate 0.01% 0.33% 1.74% 2.85% 6.41% 7.79%
Services 0.06% 0.47% 2.61% 3.68% 7.73% 8.87%
Public Administration 0.01% 0.18% 0.91% 1.67% 2.95% 4.00%
Energy 0.06% 0.63% 2.52% 3.55% 9.60% 9.85%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-07-08T165153.454

New Issues New Issues [Continued]

1. Chaudiere Financial LP (CAD) 3.525% 12/31/2059 (07/01/2019):290MM Senior Unsecured Notes, Price at Issuance 100.014, Yielding 3.52%.


Additional Commentary

NEW ISSUANCE WATCH: on 6/27/19 participants welcome a $800MM new corporate-bond offering by Telus Corp. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 6/21/19, with a net outflow of $602MM, year-to-date $8.9B 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)
SuperValu Inc. (5Y Sen USD XR14)
Atmos Energy Corp. (5Y Sen USD MR14)

unnamed - 2019-06-27T171405.824

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • Valence Surface Technologies, Moneygram Intl. Inc., Vici Properties LLC, Vidrala SAdd
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 23 bp (basis points), as of 07/01/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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Topics: High Yield, Investment Grade, Loans, Analytics, bonds, junk bonds, bond market, market analytics, New Issues, Finance, Fixed Income, News, Syndicated Bonds, syndicated, research, market update

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