Investment Grade Bond Research - July 9, 2019

Posted by Corey Mahoney on Jul 9, 2019 5:14:51 PM

BOND INVESTORS TURN BEARISH on longer-dated U.S. government debt following the release of asound June payroll report and reducing bets the Fed will cut interest rates this month.  Analysts say a prolonged inverted yield curve is a predictor of a recession and has foreshadowed the last nine recessions.  “It has to stay there for a couple of months before you start to worry. One month or so, we wouldn’t consider it a lengthy period of time,” said Falconio. “We believe it’s an indicator of a long-term recession, however, it isn’t signaling a recession any time soon.”  The spread between the two and ten-year notes narrowed to 14.2 basis points, the closest since May 31st.  The 10-year note advanced 0.8 basis points.  S&P +0.12%, DOW -0.08, NASDAQ +0.54%

JOB OPENINGS SLIGHTLY FELL to 7.32 million remaining near record highs as companies hired 5.73 million people in May.  Hiring dwindled in the manufacturing and heavy-industry sectors largely due to the ongoing trade spat between the U.S. and China.  Openings outnumber the number of unemployed for the fifteenth straight month as employers struggle to find skilled labor.  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,  Transcontinental Gas Pipe Corp. (USD) 5.4% 8/15/2041 made analysts' 'Conviction Buy' lists. (See the chart for Transcontinental Gas Pipe Corp. bonds below.) Corey Mahoney (
Key Gainers and Losers Volume Leaders
+   Ford Motor Co. 4.346% 12/8/2026 + 1.3%
  Southern California Edison Co. 4.125% 3/1/2048 + 2.1%
-   Broadcom Corp. 3.875% 1/15/2027 -0.7%
Vodafone Group PLC   6.15% 2/27/2037
Morgan Stanley   VAR% 1/24/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.21% -0.13% 0.55% 2.86% 6.45% 5.14%
Mining -0.11% -0.04% 1.98% 3.67% 9.46% 8.63%
Construction -0.19% 0.11% 1.33% 4.08% 8.39% 8.74%
Manufacturing -0.07% -0.11% 1.59% 3.97% 7.69% 7.44%
Transportion, Communication, Electric/Gas -0.13% -0.10% 1.96% 4.99% 9.91% 10.11%
Wholesale -0.09% -0.25% 1.19% 3.71% 8.34% 7.97%
Retail -0.03% -0.11% 1.78% 4.08% 8.17% 8.47%
Finance, Insurance, Real-Estate -0.04% -0.09% 0.95% 3.10% 6.57% 7.61%
Services -0.10% -0.16% 1.40% 3.95% 7.73% 8.48%
Public Administration -0.09% -0.09% 0.06% 1.93% 3.13% 4.56%
Energy -0.12% -0.14% 1.95% 3.78% 9.72% 9.09%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-07-09T171125.221

New Issues New Issues [Continued]

1. Virginia Electric & Power Co. (USD) 2.875% 7/15/2029 (07/08/2019): 500MM Senior Unsecured Notes, Price at Issuance 99.965, Yielding 2.88%.

2. Total Capital SA (USD) 2.829% 1/10/2030 (07/08/2019): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.83%.


Additional Commentary

NEW ISSUANCE WATCH: on 7/9/19 participants welcome a $400MM new corporate-bond offering by FS KKR Capital 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)
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:
  • 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 11 bp (basis points), as of 07/09/19
  • 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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