Investment Grade Bond Research - March 29, 2019

JUNK BONDS REGAINED FAVOR AGAINST HIGH-GRADE debt in net prices linked to actual trades. Treasury yields rose on Friday and finished the month down as investors digested the Feds dovish tone. “The market is still trying to process the change of hearts by the Federal Reserve”, Thanos Bardas. The 10-year Treasury note advanced 1.7 basis points. S&P +0.67%, DOW +0.82%, NASDAQ +0.78% 

LYFT SHARES SOAR ON ITS DEBUT opening up 21 percent from its IPO price settling up 8.74 percent, $78.29 per share; the IPO raised $2.3 billion. The company rewarded its most loyal drivers with IPO shares, some drivers received upwards of $1000 towards shares. U.S. Consumer spending ticked slightly higher in January signaling households are wary of the economy. Meanwhile, inflation declined in January to its slowest rate since 2016. Economists speculate the slowdown is linked to the Government shutdown, “American consumers remained cautious in January amidst the government shutdown…However, we still expect to see a rebound in February”. 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,  Wynn Las Vegas (XUA) 5.25% 5/15/2027 Reg S made analysts' 'Conviction Buy' lists. (See the chart for  ADI Indices above) Corey Mahoney cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   New York Life Global Funding 2.3% 6/10/2022 144A + 0.9%   Southern Co. FLT% 9/30/2020 144A + 0.0% -   Mars Inc. 3.875% 4/1/2039 144A -0.1%	21st Century Fox America   4.03% 1/25/2024 144A Anheuser-Busch Co. Inc.   4.9% 2/1/2046 144A

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.28% 0.95% 2.01% 4.51% 4.44% 4.51% Mining -0.01% 1.10% 2.26% 6.07% 5.66% 5.07% Construction 0.01% 1.15% 2.50% 4.95% 4.65% 4.74% Manufacturing -0.02% 0.98% 2.05% 4.37% 4.08% 4.22% Transportion, Communication, Electric/Gas -0.01% 1.31% 2.75% 5.72% 5.34% 5.52% Wholesale -0.03% 0.87% 1.97% 4.99% 4.74% 4.29% Retail -0.03% 1.07% 2.21% 4.78% 4.46% 4.68% Finance, Insurance, Real-Estate -0.02% 0.66% 1.49% 3.68% 3.44% 5.00% Services -0.07% 1.03% 2.18% 4.53% 4.19% 5.15% Public Administration -0.02% 0.36% 0.82% 1.39% 1.21% 3.47% Energy 0.01% 1.14% 2.39% 6.29% 5.92% 5.56%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Vodafone Group PLC (USD) 7% 4/4/2079 (03/28/2019): 2000MM Subordinated Notes, Price at Issuance 100, Yielding 7%. 2. Morgan Stanley (USD) 0% 4/5/2049 (03/28/2019): 80MM Senior Unsecured Notes, Price at Issuance 30.216, Yielding 4.03%.

NEW ISSUANCE WATCH: on 3/29/19 participants welcome a $50MM 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 3/22/19, 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)
Rite Aid Corp. (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	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:

• 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 03/29/19
• Net positive capital flows into high-yield ETFs & mutual funds

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