SUBDUED INFLATION REINFORCES the Fed’s case to “act as appropriate to sustain the expansion" by slashing interest rates. Risk-off sentiment prevailed as investment grade debt rose against high yield bonds in net prices linked to actual trades. The Treasury yield curve steepened on Wednesday ahead of the Fed’s meeting next week signaling expectations of a rate cut. The 10-year note dipped 2.2 basis points. S&P -0.20%, DOW -0.17, NASDAQ -0.38%.
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CONSUMER PRICE INDEX TICKED HIGHER IN MAY rising a seasonally adjusted 0.1 percent down from a 0.2 percent gain in April.
Gasoline and used auto prices dragged the index lower falling 0.5 percent and 1.4 percent respectively.
Year-over-year CPI declined 2 percent,
“It definitely gives the Fed scope to loosen but I don’t think low core inflation on its own is going to cause the Fed to cut interest rates.” Delivery of
July crude slipped 4.11 percent marking the third consecutive day of declines upon a report
supplies climbed by 2.2 million barrels. ADI proprietary index data showed a net
yield increment for high-yield versus high-grade bonds.
High-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded,
Microsoft Corp. (USD) 4.2% 11/3/2035 made analysts' 'Conviction Buy' lists. (See the chart for
Microsoft Corp. bonds below.)
Corey Mahoney (
cmahoney@advantagedata.com).
| Key Gainers and Losers |
Volume Leaders |
| + |
Buckeye Partners LP 3.95% 12/1/2026 |
+ 0.8% |
| |
WPP Finance Corp. 3.75% 9/19/2024 |
+ 0.2% |
| - |
Halliburton Co. 5% 11/15/2045 |
-1.6% |
|
Caterpillar Financial Services Corp. FLT% 5/15/2020
Halliburton Co. 5% 11/15/2045
|
| Industry Returns Tracker |
| Industry |
Past Day |
Past Week |
Past Month |
Past Quarter |
YTD |
Past Year |
| Agriculture, Forestry, Fishing |
0.07% |
0.35% |
1.28% |
4.20% |
7.16% |
5.14% |
| Mining |
0.01% |
0.06% |
1.07% |
3.55% |
7.17% |
7.23% |
| Construction |
0.07% |
0.08% |
1.85% |
4.06% |
6.06% |
6.48% |
| Manufacturing |
-0.00% |
0.13% |
1.49% |
3.62% |
5.87% |
6.52% |
| Transportion, Communication, Electric/Gas |
0.03% |
0.06% |
1.71% |
4.75% |
7.66% |
9.35% |
| Wholesale |
0.01% |
0.18% |
1.35% |
3.80% |
6.97% |
7.22% |
| Retail |
0.03% |
0.05% |
1.47% |
3.56% |
6.07% |
6.70% |
| Finance, Insurance, Real-Estate |
-0.02% |
0.02% |
1.21% |
3.03% |
5.35% |
6.91% |
| Services |
0.01% |
0.10% |
1.76% |
3.73% |
6.19% |
7.63% |
| Public Administration |
-0.07% |
0.02% |
1.03% |
2.10% |
2.84% |
4.77% |
| Energy |
0.03% |
0.05% |
1.19% |
3.83% |
7.76% |
9.32% |
| |
| Total returns (non-annualized) by rating, market weighted. |
|
| New Issues |
New Issues [Continued] |
|
1. Northwest Natural Gas Co. (USD) 3.869% 6/15/2049 (06/11/2019):90MM Secured Notes, Price at Issuance 100, Yielding 3.87%.
2. Southwestern Public Service Co. (USD) 3.75% 6/15/2049 (06/11/2019): 300MM Secured Notes, Price at Issuance 98.739, Yielding 3.82%.
|
|
Additional Commentary
NEW ISSUANCE WATCH: on 6/12/19 participants welcome a $500MM new corporate-bond offering by Met Life Global Funding 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) |
Rite Aid Corp. (5Y Sen USD XR14)
Weatherford International LTD (5Y Sen USD MR14) |
SuperValu Inc. (5Y Sen USD MR14)
San Miguel Corp. (5Y Sen USD CR14) |
Loans and Credit Market Overview
SYNDICATED LOANS HIGHLIGHTS:
Deals recently freed for secondary trading, notable secondary activity:
- Avantor Performance Materials Inc., United PF Holdings LLC, Packers Holdings
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 20 bp (basis points), as of 06/12/19
- Net positive capital flows into high-yield ETFs & mutual funds
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