INVESTMENT GRADE DEBT ROSE AGAINST ITS HIGH YIELDING COUNTERPARTS in net prices linked to actual trades. The service sector carried the economy in May with a solid performance contrary to recent manufacturing and consumer spending reports. The Fed is overall pleased with the economy as it expanded at “a modest pace overall” showing resilience despite the escalation of trade tensions and a tight labor market. The 10-year note further dipped 2.2 basis points. S&P +-0.54%, DOW +0.56, NASDAQ +0.35%.
THE U.S. PRIVATE SECTOR ADDED A DISMAL 27,000 JOBS in the month of May according to an ADP report
substantially less than the estimated 173,000 new jobs. Employers continue to struggle with sourcing labor,
“Labor shortages are impeding job growth, particularly at small companies, and layoffs at bricks-and-mortar retailers are hurting”. The number of
Americans applying for a mortgage increased last week amid
mortgage rates falling to 17-month lows. Underlining data revealed the spike in activity is due to homeowners
refinancing not homebuyers, refinances are up 33 percent year-over-year.
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, Citigroup Inc. (USD) 4.125% 7/25/2028 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Corey Mahoney (cmahoney@advantagedata.com).
| Key Gainers and Losers |
Volume Leaders |
| + |
Dowdupont Inc. 5.419% 11/15/2048 |
+ 0.1% |
| |
Bank of Montreal 1.75% 9/11/2019 |
+ 0.1% |
| - |
CVS Health Corp. 5.05% 3/25/2048 |
-0.4% |
|
Suzano Austria GmbH 7% 3/16/2047 Reg S
Vistra Operations Co. LLC 4.3% 7/15/2029 144A
|
| Industry Returns Tracker |
| Industry |
Past Day |
Past Week |
Past Month |
Past Quarter |
YTD |
Past Year |
| Agriculture, Forestry, Fishing |
-0.18% |
0.66% |
2.03% |
4.31% |
6.76% |
5.08% |
| Mining |
-0.19% |
0.37% |
0.95% |
3.64% |
7.28% |
6.84% |
| Construction |
-0.20% |
0.71% |
1.79% |
4.01% |
5.20% |
6.10% |
| Manufacturing |
-0.15% |
0.67% |
1.46% |
3.92% |
6.01% |
6.41% |
| Transportion, Communication, Electric/Gas |
-0.29% |
0.78% |
1.79% |
5.09% |
7.60% |
8.99% |
| Wholesale |
-0.18% |
0.42% |
1.22% |
3.70% |
6.67% |
6.52% |
| Retail |
-0.33% |
0.67% |
1.54% |
4.03% |
6.22% |
6.65% |
| Finance, Insurance, Real-Estate |
-0.14% |
0.54% |
1.39% |
3.37% |
5.56% |
6.90% |
| Services |
-0.24% |
0.79% |
1.84% |
4.04% |
6.15% |
7.53% |
| Public Administration |
-0.15% |
0.50% |
1.16% |
2.41% |
2.77% |
4.69% |
| Energy |
-0.27% |
0.38% |
1.02% |
3.84% |
7.56% |
8.73% |
| |
| Total returns (non-annualized) by rating, market weighted. |
|
| New Issues |
New Issues [Continued] |
|
1. John Deere Capital Corp. (USD) 2.6% 3/7/2024 (06/04/2019):600MM Senior Unsecured Notes, Price at Issuance 99.829, Yielding 2.64%.
2. John Deere Capital Corp. (USD) FLT% 6/7/2021 (06/04/2019):400MM Senior Unsecured Notes, Price at Issuance 100.
|
|
Additional Commentary
NEW ISSUANCE WATCH: on 6/5/19 participants welcome a $800MM new corporate-bond offering by Vistra Operations Co LLC. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/31/19, with a net outflow of $1.3B, year-to-date $9.8B 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:
- Packers Holdings, Charles Schwab Corp., Tundra Energy Marketing , Louis Dreyfus Corp.
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 14 bp (basis points), as of 06/05/19
- Net positive capital flows into high-yield ETFs & mutual funds
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