Investment Grade Bond Research - June 27, 2019

FED PRESIDENT MARY DALY of San Francisco believes the time is not right to cut rates, “It’s too early from my perspective to know whether we should use the tool at all and what magnitude of the tool we should apply.” Mortgage rates tumble to 3.73 percent for a 30-year marking a two-and-half year low. Sam Khater Chief Economist at Freddie Mac stated, “While the industrial and trade-related economic data continues to dominate the news, the drop in mortgage rates over the last two months is already being felt in the housing market.” The 10-year note dipped 3.8 basis points. S&P +0.47%, DOW +0.08, NASDAQ +0.77%.

THE NUMBER OF AMERICANS APPLYING for unemployment benefits increased in June to the highest level in two months climbing by 10,000 claims.  Analysts estimate claims to further rise in the coming months since manufactures temporarily shut down for retooling.  The labor market remains strong and shows no significant signs of weakness driving the economy forward despite the ongoing trade spat with China.  First quarter GDP remained at 3.1 percent after government revisions largely due to strong business investment offsetting weak spending.  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,   Comcast Corp. (USD) 3.4% 7/15/2046 made analysts' 'Conviction Buy' lists. (See the chart for Comcast Corp. below.) Corey Mahoney (cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Marathon Oil Corp. 4.4% 7/15/2027 + 0.3%   CVS Health Corp. 4.3% 3/25/2028 + 0.6% -   Conagra Brands Inc. 5.4% 11/1/2048 -0.7%	CVS Health Corp.   4.78% 3/25/2038 Canadian Imperial Bank of Commerce   3.5% 9/13/2023

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.02% 0.28% 2.55% 3.74% 8.46% 5.19% Mining -0.22% 0.73% 2.32% 3.43% 9.03% 9.23% Construction -0.21% 0.35% 2.32% 3.39% 7.23% 8.00% Manufacturing -0.25% 0.38% 2.40% 3.46% 7.23% 7.65% Transportion, Communication, Electric/Gas -0.29% 0.50% 2.88% 4.46% 9.40% 10.57% Wholesale -0.27% 0.25% 1.91% 3.30% 8.06% 8.20% Retail -0.30% 0.43% 2.59% 3.51% 7.78% 8.54% Finance, Insurance, Real-Estate -0.20% 0.20% 1.71% 2.82% 6.30% 7.73% Services -0.24% 0.43% 2.61% 3.67% 7.54% 9.01% Public Administration -0.15% -0.02% 1.05% 1.75% 3.19% 4.79% Energy -0.28% 0.71% 2.24% 3.36% 9.12% 9.69%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Barclays Bank PLC (USD) 0% 7/1/2049 (06/26/2019): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%. 2. EPCOR Utilities Inc. (CAD) 1.94% 7/8/2022 (06/26/2019): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.94%.

NEW ISSUANCE WATCH: on 6/26/19 participants welcome a $350MM new corporate-bond offering by AIG Global Funding. 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) Weatherford International LTD (5Y Sen USD MR14)	SuperValu Inc. (5Y Sen USD XR14) San Miguel Corp. (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Moneygram Intl. Inc., Vici Properties LLC, Vidrala SA, Hilton Worldwide Finance LLC

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 19 bp (basis points), as of 06/27/19
• Net positive capital flows into high-yield ETFs & mutual funds

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