Investment Grade Bond Research - May 14, 2019

Posted by Corey Mahoney on May 14, 2019 5:22:14 PM

JUNK BONDS ROSE AGAINST INVESTMENT GRADE DEBT in net prices linked to actual trades. Treasury yields ticked higher on Tuesday following optimism from the White House regarding China trade talks stating the tariff war is “a little squabble”. The 10-year note gained 1.6 basis points. Equities regained some losses from yesterday, S&P - +1.03%, Dow +1.05%, NASDAQ +1.34%.

MORTGAGE DEFAULTS CLIMBED IN THE FIRST QUARTER OF 2019 rising from 18-year low, meanwhile, mortgage originations fell during the same period.  The White House announced plans to privatize Franny Mac and Freddie Mac in the even Congress does not come up with a plan to overhaul the two giant mortgage middlemen.  Delivery of June Crude oil advanced subsequent to reports of attacks on a Saudi Arabia oil facility, “the attack on pumping stations of the East-West pipeline in Saudi Arabia is significant”. 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) 3.5% 10/1/2020 made analysts' 'Conviction Buy' lists. (See the chart for  ADI indixes above.) Corey Mahoney (
Key Gainers and Losers Volume Leaders
+   Societe Generale 4.75% 9/14/2028 144A + 0.3%
  Vodafone Group PLC 4.375% 5/30/2028 + 0.2%
-   GE Capital Intl. Funding Co. 3.373% 11/15/2025 -0.2%
Bristol-Myers Squibb Co.   3.4% 7/26/2029 144A
Buckeye Partners LP   4.875% 2/1/2021
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.26% 0.41% 0.93% 3.46% 5.34% 4.77%
Mining 0.06% 0.00% 0.18% 3.07% 6.02% 6.14%
Construction 0.21% 0.24% 1.20% 3.15% 4.46% 5.79%
Manufacturing 0.10% 0.14% 0.58% 2.69% 4.72% 5.37%
Transportion, Communication, Electric/Gas 0.04% 0.10% 0.80% 3.79% 6.09% 7.16%
Wholesale 0.03% 0.12% 0.74% 3.12% 5.58% 6.04%
Retail 0.13% 0.13% 0.58% 2.71% 4.87% 5.93%
Finance, Insurance, Real-Estate 0.14% 0.25% 0.74% 2.56% 4.38% 5.96%
Services 0.10% 0.16% 0.51% 2.50% 4.45% 6.15%
Public Administration 0.23% 0.35% 0.84% 1.70% 1.93% 4.26%
Energy 0.02% -0.08% 0.12% 3.22% 6.36% 6.58%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-05-14T172101.823

New Issues New Issues [Continued]

1. NSTAR Electric Co. (USD) 3.25% 5/15/2029 (05/14/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.78, Yielding 3.28%.

2. SunTrust Bank Inc. (USD) 2.8% 5/17/2022 (05/14/2019): 1350MM Senior Unsecured Notes, Price at Issuance 99.949, Yielding 2.82%.


Additional Commentary

NEW ISSUANCE WATCH: on 5/14/19 participants welcome a $1000MM new corporate-bond offering by Waste Management Inc. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/10/19, with a net outflow of $212MM, year-to-date $13.6B 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 CR14)
Cable & Wireless Communication (5Y Sen USD CR14)
SuperValu Inc. (5Y Sen USD MR14)

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Loans and Credit Market Overview


Deals recently freed for secondary trading, notable secondary activity:
  • Eldorado Gold Corp., Oryx Midstream, Hargray Communications Group Inc., Rikshem AB
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 12 bp (basis points), as of 05/14/19
  • Net positive capital flows into high-yield ETFs & mutual funds

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Topics: High Yield, Investment Grade, Loans, Analytics, bonds, junk bonds, bond market, market analytics, New Issues, Finance, Fixed Income, News, Syndicated Bonds, syndicated, research, market update

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