Investment Grade Bond Research - March 14, 2019

LONG-DATED US TREASURY YIELDS GAINED UPON GEOPOLITICAL TENSIONS around the globe.  Trade talks between the U.S. and China are in a gridlock and Brexit uncertainties grow after parliament rejects a no-deal.  The White House announced there is “no rush” to finalize a trade deal, unwilling to compromise over intellectual property rights.  The 10-year U.S. Treasury note gained 0.7 basis points and the 30-year note rose 2.2 basis points.  S&P +0.08% Dow +0.07% NASDAQ +0.08%

SOFT ECONOMIC DATA HIGHLIGHTS SLOWING GROWTH, the number of unemployment applications ticked higher than forecasted last week, indicating a slowing labor market.  US import prices are the latest indicator that inflation appears to be tame.  In January however, import prices jumped 0.6 percent largely due to a 5 percent increase in fuel costs.  Fixed-rate mortgages sink to 13-month lows falling in line with a decelerating housing market.  Home sales declined more than expected in January depicting a slowing market despite falling interest rates, sales plunged 6.9 percent. The supply of homes slightly increased compared to the previous month meanwhile the median price fell 3.8 percent.  ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds. High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded, Pacific Gas & Electric Co (USD) 6.05% 3/1/2034 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above) Corey Mahoney cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Schlumberger Hldgs Corp. 3% 12/21/2020 144A + 0.2%   Volkswagen Group of America Finance LLC 3.875% 11/13/2020 144A + 0.0% -   Dell Intl LLC 5.3% 10/1/2029 144A -0.4%	Maple Escrow Subsidiary Inc.   4.057% 5/25/2023 144A Dell Intl LLC   5.3% 10/1/2029 144A

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.06% 0.27% 0.94% 3.40% 2.68% 4.40% Mining -0.00% 0.42% 0.90% 4.32% 3.75% 3.64% Construction -0.04% 0.53% 1.01% 3.82% 2.60% 3.89% Manufacturing -0.03% 0.43% 0.60% 3.22% 2.67% 3.34% Transportion, Communication, Electric/Gas -0.08% 0.58% 1.05% 4.20% 3.27% 4.12% Wholesale 0.07% 0.39% 1.04% 3.84% 3.92% 3.42% Retail -0.01% 0.50% 0.62% 3.34% 2.69% 3.48% Finance, Insurance, Real-Estate -0.00% 0.35% 0.76% 3.14% 2.29% 4.10% Services -0.04% 0.48% 0.62% 3.32% 2.54% 3.91% Public Administration 0.01% 0.19% 0.47% 1.69% 0.77% 3.24% Energy -0.04% 0.42% 0.99% 4.56% 4.01% 4.13%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. KLA-Tencor Corp. (USD) 5% 3/15/2049 (03/13/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.278, Yielding 5.05%. 2. Ford Motor Credit Co. (USD) 5.584% 3/18/2024 (03/13/2019):1500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.58%.

NEW ISSUANCE WATCH: on 3/14/19 participants welcome a $2500MM new corporate-bond offering by
Citigroup Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/8/2019, with a net outflow of $1.69B, year-to-date $7.8B 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 XR14)	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:

• XPO Logistics Inc., MYOB LTD, Dell International, Amer Sports 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 18 bp (basis points), as of 03/14/19
• Net positive capital flows into high-yield ETFs & mutual funds

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