Investment Grade Bond Research - July 18, 2019

Posted by Pierre Robert on Jul 18, 2019 5:11:19 PM

PEMEX unvieled yesterday in a 200 page business plan that they plan to overhaul PEMEX. They plan cost cuts that would create $6.6 billion in savings. The government of Mexico plans to inject $7.8 billion into PEMEX. PEMEX also plans to invest $104.6 billion over the next 6 years. This unveiling caused  Petroleos Mexicanos (USD) 6.5% 3/13/2027, Petroleos Mexicanos (USD) 3.5% 1/30/2023, Petroleos Mexicanos (USD) 4.875% 1/18/2024, Petroleos Mexicanos (USD) 6.5% 6/2/2041, Petroleos Mexicanos (USD) 6.375% 1/23/2045 to trade over $200 million bonds today.

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unnamed - 2019-07-18T170855.947
 
US and EU SOVEREIGNS yields continue to by and large have downward pressure today. The US was still above 2% but the entire yield curve was down. White House and various Fed official desire additional stimulus.  Europe was mixed to down still concerned with negative yields. Britain’s yield curve was up. 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, South Carolina Electric & Gas Company (USD) 5.8% 1/15/2033 made analysts' 'Conviction Buy' lists. (See the chart for South Carolina Electric & Gas Company below.) Pierre Robert
 
Key Gainers and Losers Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 1.1%
  Anheuser-Busch Inbev Worldwide Inc. 4.75% 1/23/2029 + 0.3%
-   Cimarex Energy Co. 3.9% 5/15/2027 -1.6%
  EQT Corp. 3.9% 10/1/2027 -1.2%
CVS Health Corp.   5.05% 3/25/2048
Anheuser-Busch Inbev Worldwide Inc.   4.75% 1/23/2029
Anheuser-Busch Inbev Worldwide Inc.   5.55% 1/23/2049
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.17% 0.17% 0.23% 3.04% 8.43% 8.27%
Mining 0.16% -0.02% 1.64% 3.23% 9.23% 8.14%
Construction 0.23% 0.08% 1.40% 3.90% 7.26% 7.79%
Manufacturing 0.21% -0.04% 1.25% 3.80% 7.62% 7.13%
Transportion, Communication, Electric/Gas 0.35% -0.06% 1.65% 4.67% 9.79% 9.69%
Wholesale 0.21% 0.08% 1.19% 3.68% 8.49% 7.88%
Retail 0.30% -0.10% 1.42% 4.15% 8.35% 8.33%
Finance, Insurance, Real-Estate 0.18% -0.02% 0.84% 3.13% 6.72% 7.60%
Services 0.24% -0.02% 1.19% 3.96% 7.74% 8.16%
Public Administration 0.23% -0.04% 0.30% 2.18% 3.32% 4.79%
Energy 0.17% -0.04% 1.68% 3.43% 9.46% 8.66%
 
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-07-18T170858.597

New Issues New Issues [Continued]

1. Low Income Investment Fund (USD) 3.711% 7/1/2029 (07/17/2019): 75MM Unsecured Notes, Price at Issuance 100, Yielding 3.71%.

2. MPT Operating Partnership LP (USD) 4.625% 8/1/2029 (07/18/2019): 900MM Senior Unsecured Notes, Price at Issuance 99.5, Yielding 4.69%.

3. Toronto-Dominion Bank (USD) 2.75% 7/22/2022 (07/18/2019):125MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.75%.

 

Additional Commentary


NEW ISSUANCE WATCH: on 7/18/19 participants welcome a $2500MM new corporate-bond offering by Bank of America 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 MR14)
Hertz Corp. (5Y Sen USD CR14)
Road King Infrastructure LTD (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

unnamed - 2019-07-18T170901.482

Loans and Credit Market Overview


SYNDICATED LOANS HIGHLIGHTS:

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 19 bp (basis points), as of 07/18/19
  • 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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