Investment Grade Bond Research - March 7, 2019

Written by Corey Mahoney | Mar 7, 2019 10:25:36 PM

U.S. TREASURY YIELDS PLUMMETED upon the European Central Bank announcing a shift in economic policy holding rates steady and slashing its GDP forecast. Jobless claims slightly declined last week by 3.000 jobs for a seasonally adjusted 223,000 jobs. The 10-year U.S. Treasury note dipped 5 basis points and the 30-year note sank 4 basis points. S&P -0.81%, Dow -0.78%, NASDAQ -1.13%

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CONSUMER BORROWING INCREASED IN JANUARY, according to a report from the Federal Reserve consumer debt rose by $17 billion, seasonally adjusted $4.03 trillion. Former chief economist from Wells Fargo is not concerned with the uptick of consumer debt stating, consumer credit remains “ok for now”however, “When the economy slows down and jobs start drying up, that’s when you’ll see who is over their skis”. On a positive note, U.S. productivity improved in the fourth quarter to 1.9 percent for the fourth quarter of 2018. Increased productivity directly corresponds to sound business investment growth signaling companies are allocating capital in strategic areas boosting efficiency. 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, Bank of America Corp. (USD) 11% 1/13/2031 made analysts' 'Conviction Buy' lists. (See the chart for Bank of America Corp. below) . Corey Mahoney (cmahoney@advantagedata.com).

Key Gainers and Losers

Volume Leaders

+	Verizon Communications Inc. 4.016% 12/3/2029 144A	+ 0.4%
	UBS Group Funding LTD. (USD) 4.125% 9/24/2025 144A	+ 0.3%
-	BMW US Capital LLC 1.5% 4/11/2019 144A	-0.0%

Dell Intl LLC 4% 7/15/2024 144A
Anheuser-Busch Co. Inc. 4.7% 2/1/2036 144A

Industry Returns Tracker

Industry	Past Day	Past Week	Past Month	Past Quarter	YTD	Past Year
Agriculture, Forestry, Fishing	0.26%	0.03%	0.56%	3.02%	2.40%	4.34%
Mining	0.07%	-0.00%	0.30%	4.32%	3.28%	3.13%
Construction	0.23%	0.13%	0.54%	3.31%	2.24%	3.70%
Manufacturing	0.08%	0.08%	0.10%	3.09%	2.27%	3.00%
Transportion, Communication, Electric/Gas	0.12%	0.13%	0.46%	3.82%	2.67%	3.68%
Wholesale	0.07%	0.37%	0.64%	3.81%	3.55%	3.17%
Retail	0.09%	0.05%	0.10%	2.97%	2.26%	3.07%
Finance, Insurance, Real-Estate	0.07%	0.08%	0.47%	2.84%	1.89%	3.84%
Services	0.13%	0.07%	0.15%	3.11%	2.09%	3.48%
Public Administration	0.09%	0.00%	0.26%	1.46%	0.58%	3.17%
Energy	0.08%	0.07%	0.45%	4.56%	3.58%	3.70%

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

New Issues	New Issues [Continued]
1. Dell Intl. LLC Emc Corp. (USD) 4.9% 10/1/2026 Reg S (03/06/2019): 1750MM First Lien Notes, Price at Issuance 99.743, Yielding 4.94%. 2. Marriott International Inc. (USD) FLT% 3/8/2021 (03/06/2019):300MM Senior Unsecured Notes, Price at Issuance 100.

New Issues

New Issues [Continued]

1. Dell Intl. LLC Emc Corp. (USD) 4.9% 10/1/2026 Reg S (03/06/2019): 1750MM First Lien Notes, Price at Issuance 99.743, Yielding 4.94%.

2. Marriott International Inc. (USD) FLT% 3/8/2021 (03/06/2019):300MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 3/7/19 participants welcome a $500MM new corporate-bond offering by
Quest Diagnostics Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 2/22/19, with a net inflow of $0.69B, year-to-date $9.7B 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:

Wynn Resorts LTD., Xylem Inc., Amer Sports Corp., Orchid Orthopedic Solutions, Neustar 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 15 bp (basis points), as of 03/07/19
Net positive capital flows into high-yield ETFs & mutual funds

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