Investment Grade Bond Research - June 11, 2019

Posted by Corey Mahoney on Jun 11, 2019 5:12:36 PM

JUNK BONDS ROSE AGAINST INVESTMENT GRADE debt in net prices linked to actual trades as a risk-on sentiment continues. Margaret Patel, a senior portfolio manager at Wells Fargo, sees further gains in the high yield market, “The risk-taker will be rewarded” thanks to the Feds patient stance on monetary policy. The 10-year note dipped 0.4 basis points. S&P -0.03%, DOW -0.05, NASDAQ -0.01%.

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PRODUCER PRICES SLIGHTLY ADVANCED IN MAY following a surge in the cost of hospitality accommodations.  Inflation should remain subdued given recent data, “The report suggests limited pipeline inflationary pressures.”  Gig workers or “side hustlers” have revolutionized the labor forceand the U.S. economy. The government is in a debate on whether to treat the workers as contractors or employees.  It is estimated 36 percent of the workforce are classified as gig workers earning a combined for $1.4 trillion in 2018.  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, General Motors Co. (USD) 5% 4/1/2035 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Corey Mahoney (
Key Gainers and Losers Volume Leaders
+   3M Co. 4% 9/14/2048 + 0.3%
  Morgan Stanley 3.875% 1/27/2026 + 0.0%
-   CVS Health Corp. 5.05% 3/25/2048 -0.3%
Visa Inc.   4.3% 12/14/2045
Volkswagen Group of America Finance LLC   3.875% 11/13/2020 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.20% 0.10% 1.26% 4.19% 7.13% 5.18%
Mining -0.09% -0.72% 1.04% 3.52% 7.27% 7.15%
Construction -0.20% -0.19% 1.74% 3.79% 5.84% 6.27%
Manufacturing -0.18% -1.61% 1.47% 3.56% 5.85% 6.46%
Transportion, Communication, Electric/Gas -0.32% -0.31% 1.65% 4.62% 7.57% 9.16%
Wholesale -0.14% 0.03% 1.33% 3.86% 6.99% 6.95%
Retail -0.23% -2.16% 1.41% 3.47% 5.92% 6.60%
Finance, Insurance, Real-Estate -0.18% -0.76% 1.25% 3.06% 5.55% 6.94%
Services -0.20% -1.82% 1.73% 3.71% 6.18% 7.56%
Public Administration -0.22% -0.07% 1.11% 2.15% 2.86% 4.73%
Energy -0.15% -0.87% 1.10% 3.60% 7.49% 9.10%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-11T170916.019

New Issues New Issues [Continued]

1. HSBC Bank Canada (CAD) 2.253% 9/15/2022 (06/10/2019):1000MM Senior Unsecured Notes, Price at Issuance 100.001, Yielding 2.25%.

2. National Bank of Canada (CAD) FLT% 6/12/2020 (06/10/2019):500MM Senior Unsecured Notes, Price at Issuance 100.


Additional Commentary

NEW ISSUANCE WATCH: on 6/11/19 participants welcome a $325MM new corporate-bond offering by WP Carey Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 6/7/19, with a net outflow of $3.2B, year-to-date $6.6B flowed into high-yield.
Top Widening Credit Default Swaps (CDS) Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14)
Hertz Corp. (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD XR14)
San Miguel Corp. (5Y Sen USD CR14)

unnamed - 2019-05-28T172415.939

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • United PF Holdings LLC, Packers Holdings, Charles Schwab Corp., Tundra Energy Marketing
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 15 bp (basis points), as of 06/11/19
  • 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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