Investment Grade Bond Research - March 28, 2019

Written by Corey Mahoney | Mar 28, 2019 9:12:43 PM

INVESTMENT-GRADE DEBT NARROWLY EDGED OUT JUNK BONDS in net prices linked to actual trades. Equities failed to find a direction upon the release of revised GDP growth cutting the fourth-quarter growth to 2.2 percent from 2.6 percent, well below the 3 percent annual target. Economists blame softer consumer spending and a decline in business investment from China, a result of the ongoing trade dispute. The 10-year Treasury note advanced 1.4 basis points. S&P +0.39%, DOW +0.37%, NASDAQ+0.37%

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JOBLESS CLAIMS FELL LAST WEEK for the second consecutive week to match the lowest levels year-to-date, layoff rates remain near half-century lows. Chief economist at Barclays stated, “Altogether, we see the initial claims data as consistent with healthy labor market conditions and further evidence that February’s abrupt slowdown in payroll gains is likely to prove transitory.” Lyft will IPO tomorrow within the price range of $70 and $72 per share raising approximately $2.1 billion, in 2018 the company posted a loss of $911 million. 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, Anheuser-Busch Inbev Worldwide Inc. (USD) 4.375% 4/15/2038 made analysts' 'Conviction Buy' lists. (See the chart for Anheuser-Busch Inbev Worldwide Inc. below) Corey Mahoney cmahoney@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	McGraw Hill Financial Inc. 3.3% 8/14/2020	+ 0.2%
	General Mills Inc. 4.7% 4/17/2048	+ 0.9%
-	CVS Health Corp. 4.3% 3/25/2028	-0.4%

Wells Fargo Bank NA 2.4% 1/15/2020
General Motors Co. 4% 4/1/2025

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.36%	1.13%	2.21%	4.91%	4.74%	4.51%
Mining	0.20%	1.20%	2.15%	6.00%	5.59%	5.11%
Construction	0.25%	1.26%	2.31%	4.99%	4.58%	5.25%
Manufacturing	0.19%	1.13%	2.10%	4.55%	4.17%	4.30%
Transportion, Communication, Electric/Gas	0.28%	1.46%	2.74%	5.76%	5.28%	5.70%
Wholesale	0.14%	1.06%	2.01%	4.99%	4.75%	4.50%
Retail	0.22%	1.20%	2.23%	4.82%	4.50%	4.92%
Finance, Insurance, Real-Estate	0.13%	0.73%	1.48%	3.76%	3.40%	5.08%
Services	0.24%	1.22%	2.20%	4.63%	4.24%	5.30%
Public Administration	0.07%	0.38%	0.82%	1.50%	1.26%	3.45%
Energy	0.20%	1.27%	2.31%	6.18%	5.83%	5.61%

Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Smithfield Foods Inc. (USD) 5.2% 4/1/2029 144A (03/27/2019):400MM Senior Unsecured Notes, Price at Issuance 99.492, Yielding 5.27%. 2. Smithfield Foods Inc. (USD) 5.2% 4/1/2029 Reg S (03/27/2019):400MM Senior Unsecured Notes, Price at Issuance 99.492, Yielding 5.27%.

New Issues

New Issues [Continued]

1. Smithfield Foods Inc. (USD) 5.2% 4/1/2029 144A (03/27/2019):400MM Senior Unsecured Notes, Price at Issuance 99.492, Yielding 5.27%.

2. Smithfield Foods Inc. (USD) 5.2% 4/1/2029 Reg S (03/27/2019):400MM Senior Unsecured Notes, Price at Issuance 99.492, Yielding 5.27%.

Additional Commentary

NEW ISSUANCE WATCH: on 3/27/19 participants welcome a $400MM new corporate-bond offering by
Smithfield Foods Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 3/22/19, with a net inflow of $1.8B, year-to-date $10B flowed into high-yield.

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Weatherford International LTD (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD XR14)	San Miguel Corp. (5Y Sen USD CR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

Kirby Corp., Syneos Health, Inc., Fred Olsen Wind LTD, Carbonite 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 18 bp (basis points), as of 03/28/19
Net positive capital flows into high-yield ETFs & mutual funds

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