Investment Grade Bond Research - July 17, 2019

Posted by Corey Mahoney on Jul 17, 2019 5:12:33 PM

INVESTMENT GRADE DEBT ROSE AGAINST junk bonds in net prices linked to actual trades. Total assets in US money market funds retreated from nearly 10-year highs last week as yields fall. Traders are estimating a 65 percent chance of a 25 basis point cut. “Even though the Fed will almost certainly cut rates at the end of the month, additional cuts depend heavily on the balance of economic data.” S&P-0.47%, DOW -0.30, NASDAQ -0.24%  The 10-year note dipped 4.6 basis points.

unnamed - 2019-06-27T171401.746

MORTGAGE APPLICATIONS SLIPPED for the third consecutive week as borrowing costs ticked higher, application volume shrunk by 1.1 percent.  Refinancing activity increased week over week and was 87 percent higher than one year ago.  Homebuilding often reports tandem results with applications decreased for the second month as permits fell to a two year low.  “Residential housing construction is one of the leading indicators of a recession, and while construction activity isn’t dropping precipitously, housing is stuck in a rut.” ADI proprietary index data showed a net yield increment for high-yield versus high-grade bondsHigh-grade edged out high-yield.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, PPL Electric Utilities Corp. (USD) 5.2% 7/15/2041 made analysts' 'Conviction Buy' lists. (See the chart for PPL Electric Utilities Corp. bonds below.) Corey Mahoney (

Key Gainers and Losers Volume Leaders
+   Bank of America Corp. 4.078% 4/23/2040 + 0.8%
  Ford Motor Credit Co. 5.584% 3/18/2024 + 0.4%
-   Deutsche Bank Securities Inc. (USD) 2.7% 7/13/2020 -0.2%
Bank of America Corp.   4.078% 4/23/2040
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.19% 0.10% 0.10% 3.24% 8.24% 8.20%
Mining -0.09% -0.40% 1.46% 3.10% 9.00% 8.10%
Construction -0.07% -0.29% 1.05% 4.03% 7.81% 7.92%
Manufacturing -0.12% -0.33% 1.09% 3.48% 7.38% 6.94%
Transportion, Communication, Electric/Gas -0.18% -0.51% 1.37% 4.30% 9.24% 9.27%
Wholesale -0.12% -0.32% 0.81% 3.19% 8.22% 7.43%
Retail -0.15% -0.46% 1.13% 3.69% 7.60% 7.79%
Finance, Insurance, Real-Estate -0.10% -0.19% 0.65% 2.87% 6.28% 7.23%
Services -0.14% -0.36% 0.96% 3.47% 7.33% 7.80%
Public Administration -0.14% 0.04% 0.06% 1.93% 3.04% 4.49%
Energy -0.15% -0.40% 1.51% 3.19% 9.28% 8.50%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-07-17T171019.687

New Issues New Issues [Continued]

1. British Airways 2019-1 (USD) 3.35% 6/15/2029 Reg S (07/16/2019): 263MM Second Lien Notes, Price at Issuance 100, Yielding 3.35%.

2. Westpac Banking Corp. (USD) 4.11% 7/24/2034 (07/16/2019):1250MM Subordinated Notes, Price at Issuance 100, Yielding 4.11%.


Additional Commentary

NEW ISSUANCE WATCH: on 7/16/19 participants welcome a $1250MM new corporate-bond offering by Westpac Banking 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)
Rite Aid Corp. (5Y Sen USD XR14)
Weatherford International LTD (5Y Sen USD MR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed - 2019-06-27T171405.824

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • Consolidated Precision Products, Starwood Property Trust Inc., Heritage Power, LLC
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 07/17/19
  • 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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