Investment Grade Bond Research - June 28, 2019

Posted by Corey Mahoney on Jun 28, 2019 5:13:56 PM

EQUITIES ROSE ON FRIDAY following the nation’s largest banks passing the Federal Reserve’s stress tests.  Meanwhile, investors are keeping a watchful eye on the G20 summit in Japan awaiting news of progress toward a resolution to the trade spat.  “What investors expect are good talks, no implementation of tariffs right away and a continuation in negotiations.” The 10-year note dipped 1.7 basis points. S&P +0.32%, DOW +0.19, NASDAQ +0.24%.

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unnamed - 2019-06-27T171401.746
CONSUMER SPENDING GREW AT A HEALTHY RATE in May indicating the economy remains strong despite a dip in the consumer sentiment report earlier this week.  April spending was revised higher to 0.6 percent from 0.3 percent but if inflationary pressures persist the Fed might react.  “Below-target inflation is a concern for the Fed, but not the primary reason they are leaning toward cutting interest rates.” A-component Apple of the FAANG group announced plans to shift some manufacturing to China from the US in spite of volatile trade tensionsADI 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,  NiSource Finance Corp. (USD) 5.8% 2/1/2042 made analysts' 'Conviction Buy' lists. (See the chart for NiSource Finance Corp. below.) Corey Mahoney (
Key Gainers and Losers Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 0.6%
  Kraft Foods Inc. 3.5% 6/6/2022 + 0.0%
-   General Electric Co. FLT% PERP (1) -2.1%
Bank of America Corp.   VAR% 2/7/2030
Citigroup Inc.   3.98% 3/20/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.01% 0.04% 2.50% 3.34% 8.41% 5.26%
Mining 0.14% 0.36% 2.46% 3.23% 9.07% 8.98%
Construction 0.17% 0.35% 2.51% 3.15% 7.38% 7.90%
Manufacturing 0.16% 0.11% 2.56% 3.37% 7.49% 7.63%
Transportion, Communication, Electric/Gas 0.26% 0.24% 3.21% 4.40% 9.77% 10.56%
Wholesale 0.12% 0.02% 1.96% 3.09% 8.08% 7.99%
Retail 0.18% 0.12% 2.92% 3.52% 8.18% 8.72%
Finance, Insurance, Real-Estate 0.11% 0.06% 1.84% 2.75% 6.44% 7.67%
Services 0.15% 0.11% 2.74% 3.50% 7.69% 8.88%
Public Administration 0.09% 0.04% 1.13% 1.75% 3.24% 4.75%
Energy 0.22% 0.40% 2.48% 3.26% 9.40% 9.67%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-06-28T170731.123

New Issues New Issues [Continued]

1. Royal Bank of Canada (CAD) 2.352% 7/2/2024 (06/27/2019):2000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.35%.

2. HAT Hldg I LLC Hat Hldg II LLC (USD) 5.25% 7/15/2024 144A (06/27/2019): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%.


Additional Commentary

NEW ISSUANCE WATCH: on 6/27/19 participants welcome a $800MM new corporate-bond offering by Telus 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)
Hertz Corp. (5Y Sen USD XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
SuperValu Inc. (5Y Sen USD MR14)
Atmos Energy Corp. (5Y Sen USD MR14)

unnamed - 2019-06-27T171405.824

Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • Valence Surface Technologies, Moneygram Intl. Inc., Vici Properties LLC, Vidrala SAdd
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 06/28/19
  • 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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