Investment Grade Bond Research - July 11, 2019

US MONEY-MARKET FUNDS pulled in $28 billion in the week ended Wednesday marking the third consecutive week of inflows rising to the highest levels since 2009. A weak global economic outlook and trade concerns have sparked fear in investors fleeing to assets with minimal risk. Middle market loan issuance rebounded in the second quarter of 2019 spiking 48 percent. “Clearly the volatility at the end of 2018 had a negative impact on all segments of the loan market in the first quarter.” The S&P 500 hit an all-time high rising above 3,000 for the first time. S&P +0.11%, DOW +0.71, NASDAQ -0.17%. The 10-year note dipped 6.5 basis points.

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THE NUMBER OF AMERICANS APPLYING FOR UNEMPLOYMENT fell last week to a three-month low reflecting the resilient labor market.  Claims dropped to 209,000 aided by the Independence Day holiday as many people wait until the following week after holidays to apply for benefits. Economists believe a recession will be avoided if the labor market stays warm however, wages are not rising at the speedthey normally do when the economy is robust. 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, Pacific Gas & Electric Co. (USD) 4% 12/1/2046 made analysts' 'Conviction Buy' lists. (See the chart for ADI Indices above.) Corey Mahoney (cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   UnitedHealth Group Inc. 2.7% 7/15/2020 + 0.2%   CVS Health Corp. 4.3% 3/25/2028 + 0.2% -   Goldman Sachs Group Inc. VAR% 5/1/2029 -0.4%	Abbvie Inc.   4.875% 11/14/2048 General Electric Co.   FLT% PERP (1)

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.03% -0.13% 0.75% 2.89% 6.52% 5.16% Mining -0.18% -0.69% 1.79% 3.37% 9.25% 8.52% Construction -0.02% -0.43% 1.61% 3.83% 7.69% 7.95% Manufacturing -0.04% -0.56% 1.57% 3.53% 7.53% 7.23% Transportion, Communication, Electric/Gas -0.08% -0.74% 2.05% 4.50% 9.83% 10.04% Wholesale -0.06% -0.59% 1.23% 3.45% 8.38% 7.81% Retail -0.10% -0.64% 1.93% 3.77% 8.27% 8.52% Finance, Insurance, Real-Estate 0.03% -0.40% 1.06% 2.86% 6.55% 7.54% Services -0.01% -0.58% 1.50% 3.54% 7.43% 8.23% Public Administration 0.30% -0.03% 0.48% 2.01% 3.33% 4.83% Energy -0.15% -0.74% 1.80% 3.35% 9.47% 8.87%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Micron Technology Inc. (USD) 4.185% 2/15/2027 (07/10/2019):900MM Senior Unsecured Notes, Price at Issuance 99.995, Yielding 4.19%. 2. Panasonic Corp. (USD) 3.113% 7/19/2029 144A (07/10/2019):500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.11%.

NEW ISSUANCE WATCH: on 7/11/19 participants welcome a $1000MM new corporate-bond offering by Nationwide Building Society.  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 CR14) Hovnanian Enterprises Inc. (5Y Sen USD MR14)	Cable & Wireless Communication (5Y Sen USD CR14) SuperValu Inc. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Heritage Power, LLC, Piaggio & C. SpA, Goshawk Aviation Ltd, Valence Surface Technologies

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 17 bp (basis points), as of 07/11/19
• Net positive capital flows into high-yield ETFs & mutual funds

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