Investment Grade Bond Research - June 25, 2019

Posted by Corey Mahoney on Jun 25, 2019 5:20:11 PM

EQUITIES DRIFTED LOWER following an announcement from Federal Reserve President Jerome Powell stating “my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation“. Currently Wall Street believes there is a 65.7 percent chance of a 25 basis point cut and a 35.4 percent chance of a 50 basis point cut. The 10-year note fell 2.8 basis points settling below 2 percent. S&P -0.95%, DOW -0.67, NASDAQ -1.51%.

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CONSUMER CONFIDENCE SLIPS TO A TWO-YEAR LOW IN JUNE amid rising trade tensions with China revealing a jolt among consumer.  Despite the fall in confidence, spending remains strong suggesting short term uncertainty with consumers; the index declined to 121.5 from May’s reading of 131.5. Newly built home sales suddenly dropped 7.8 percent in May despite a deterioration in mortgage rates making home ownership more appealing. Pacific Gas & Electric bondholders propose a bankruptcy exit plan involving an injection worth $30 billion to pay off obligations from the devastating wildfires. Bondholders claim PG&E is taking its time to action a plan and “the need to exit bankruptcy expeditiously is paramount”. 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, American International Group Inc. (USD) 8.175% 5/15/2068 made analysts' 'Conviction Buy' lists. (See the chart for American International Group Inc. bonds below.) Corey Mahoney (

Key Gainers and Losers Volume Leaders
+   AT&T Inc. FLT% 6/12/2024 + 0.2%
  JPMorgan Chase & Co. VAR% 4/23/2029 + 0.1%
-   Abbvie Inc. 4.875% 11/14/2048 -2.5%
CVS Health Corp.   5.05% 3/25/2048
Actavis Funding SCS   3.85% 6/15/2024
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.08% 0.60% 2.50% 3.90% 8.37% 5.30%
Mining 0.29% 1.28% 2.33% 3.62% 8.79% 9.02%
Construction 0.17% 0.90% 2.44% 3.78% 6.90% 7.86%
Manufacturing 0.23% 0.94% 2.48% 3.75% 7.31% 7.77%
Transportion, Communication, Electric/Gas 0.33% 1.30% 3.04% 4.90% 9.57% 10.74%
Wholesale 0.18% 0.80% 2.07% 3.63% 8.18% 8.38%
Retail 0.27% 1.08% 2.70% 3.81% 7.81% 8.64%
Finance, Insurance, Real-Estate 0.23% 0.63% 1.78% 3.07% 6.29% 7.78%
Services 0.25% 0.96% 2.56% 3.86% 7.41% 9.00%
Public Administration 0.19% 0.27% 1.15% 2.02% 3.28% 4.95%
Energy 0.31% 1.37% 2.40% 3.76% 9.10% 9.81%
Total returns (non-annualized) by rating, market weighted.

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New Issues New Issues [Continued]

1. Enterprise Products Operating LLC (USD) 3.125% 7/31/2029 (06/24/2019): 1250MM Senior Unsecured Notes, Price at Issuance 99.955, Yielding 3.13%.

2. Public Service Co. Of New Hampshire (USD) 3.6% 7/1/2049 (06/24/2019): 300MM Secured Notes, Price at Issuance 99.763, Yielding 3.61%.


Additional Commentary

NEW ISSUANCE WATCH: on 6/25/19 participants welcome a $500MM new corporate-bond offering by
American Honda Finance 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 XR14)
Hertz Corp. (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)
San Miguel Corp. (5Y Sen USD CR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • Vici Properties LLC, Vidrala SA, Hilton Worldwide Finance LLC, US Renal Care 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 23 bp (basis points), as of 06/25/19
  • 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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