INVESTMENT-GRADE DEBT ROSE SIGNIFICANTLY AGAINST JUNK BONDS in net prices linked to actual trades. Gold prices breached six-year highs settling above $1,400 an ounce following the Fed’s dovish tone after last week’s meeting. The 10-year note fell 3.9 basis points. S&P -0.09%, DOW +0.12, NASDAQ -0.23%.
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PACIFIC GAS & ELECTRIC BOND PRICES SURGED on Monday, meanwhile, shares slipped nearly six-percent representing the uncertainty surrounding the bankrupt California utility company. (See the chart below for PG&E bonds) It is estimated PG&E needs to raise $9 billion in new equity to fund the devastating fire claims for past and future victims. U.S. companies increased borrowing for equipment by 18 percent in May compared to one year prior. “The continued low interest rate environment, coupled with solid fundamentals in the U.S. economy, provide an incentive for U.S. businesses to expand and grow their operations,” ELFA Chief Executive Officer Ralph Petta said. A “slight deterioration in credit quality” has been noted which raised alarms as companies become more and more levered. 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, Enterprise Products Partners LP (USD) 6.45% 9/1/2040 made analysts' 'Conviction Buy' lists. (See the chart for ADI Indices above.) Corey Mahoney (cmahoney@advantagedata.com).
| Key Gainers and Losers |
Volume Leaders |
| + |
Wal-Mart Stores Inc. 4.05% 6/29/2048 |
+ 0.9% |
| |
GE Capital Intl. Funding Co. 4.418% 11/15/2035 |
+ 0.5% |
| - |
Hewlett-Packard Co. FLT% 10/5/2021 |
-0.0% |
|
CVS Health Corp. 4.3% 3/25/2028
Sumitomo Mitsui Banking Corp. 2.65% 7/23/2020
|
| Industry Returns Tracker |
| Industry |
Past Day |
Past Week |
Past Month |
Past Quarter |
YTD |
Past Year |
| Agriculture, Forestry, Fishing |
-0.03% |
0.57% |
2.61% |
4.37% |
8.27% |
5.26% |
| Mining |
-0.17% |
0.93% |
2.10% |
3.67% |
8.30% |
8.62% |
| Construction |
-0.24% |
0.50% |
2.52% |
3.93% |
7.01% |
8.00% |
| Manufacturing |
-0.23% |
0.75% |
2.50% |
3.97% |
6.98% |
7.54% |
| Transportion, Communication, Electric/Gas |
-0.29% |
1.00% |
3.08% |
5.10% |
9.04% |
10.22% |
| Wholesale |
-0.22% |
0.58% |
2.12% |
3.88% |
7.94% |
8.12% |
| Retail |
-0.33% |
0.78% |
2.62% |
3.95% |
7.31% |
8.41% |
| Finance, Insurance, Real-Estate |
-0.21% |
0.43% |
1.85% |
3.19% |
6.20% |
7.70% |
| Services |
-0.22% |
0.75% |
2.67% |
4.09% |
7.18% |
8.69% |
| Public Administration |
-0.18% |
0.08% |
1.17% |
2.07% |
3.07% |
4.81% |
| Energy |
-0.15% |
0.96% |
2.25% |
3.82% |
8.62% |
9.28% |
| |
| Total returns (non-annualized) by rating, market weighted. |
|
| New Issues |
New Issues [Continued] |
|
1. Mizuho Securities USA Inc. (USD) FLT% 7/24/2020 (06/24/2019):95MM Senior Unsecured Notes, Price at Issuance 100.
|
|
Additional Commentary
NEW ISSUANCE WATCH: on 6/21/19 participants welcome a $165MM new corporate-bond offering by NorthShore Re LTD. 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) |
Loans and Credit Market Overview
SYNDICATED LOANS HIGHLIGHTS:
Deals recently freed for secondary trading, notable secondary activity:
- Vidrala SA, Hilton Worldwide Finance LLC, US Renal Care Inc., Perforce Software Inc.
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 25 bp (basis points), as of 06/24/19
- Net positive capital flows into high-yield ETFs & mutual funds
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