Investment Grade Bond Research - May 16, 2019

STOCKS ROSE FOR THE THIRD STRAIGHT DAY behind strong earnings from Walmart and Cisco Systems. Troy Gayeski of SkyBridge Capital states, “The U.S. consumer is in exceptional shape, and Walmart’s results reinforce that view”. All three major indices settled about where they started at the beginning of the week, showing resilience in the the equities market. Crude Oil rose 1.69%. S&P +0.89%, Dow +0.84%, NASDAQ +0.97%.

IN THE CORPORATE BOND MARKET, Transocean Ltd. priced $525 million in senior unsecured notesdue 2023. The notes, which will have an interest rate of 5.375%, will be guaranteed by Transocean Ltd., its parent company Transocean Inc., and other wholly owned subsidiaries. The proceeds from the bonds will be used for general corporate purposes. Treasuries fell then rose today, with improved overall sentiment regarding the economy, settling up 2.4 basis points as of 4 P.M. Eastern Time. 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,  CenturyLink Inc. (USD) 5.625% 4/1/2025 made analysts' 'Conviction Buy' lists. (See the chart for ADI indexes above.) Andrew Robartes (arobartes@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 0.2%   Intel Corp. 2.45% 7/29/2020 + 0.0% -   Dowdupont Inc. 5.419% 11/15/2048 -0.9%	Wal-Mart Stores Inc.   2.35% 12/15/2022 Ford Motor Credit Co.   2.681% 1/9/2020

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.50% 0.37% 0.97% 3.42% 5.77% 4.85% Mining 0.18% 0.10% 0.30% 2.85% 6.16% 6.65% Construction 0.23% 0.20% 0.96% 2.88% 4.74% 6.02% Manufacturing 0.19% 0.25% 0.73% 2.62% 4.77% 5.91% Transportion, Communication, Electric/Gas 0.21% 0.17% 0.89% 3.55% 6.17% 8.36% Wholesale 0.15% 0.16% 0.91% 3.00% 5.83% 6.51% Retail 0.21% 0.29% 0.73% 2.58% 4.92% 6.54% Finance, Insurance, Real-Estate 0.14% 0.31% 0.81% 2.50% 4.46% 6.45% Services 0.22% 0.27% 0.70% 2.57% 4.74% 6.86% Public Administration 0.11% 0.40% 0.83% 1.61% 1.98% 4.36% Energy 0.17% 0.03% 0.26% 2.95% 6.30% 8.50%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Ryder System Inc. (USD) 2.875% 6/1/2022 (05/15/2019): 550MM Senior Unsecured Notes, Price at Issuance 99.942, Yielding 2.89%. 2. American Express Co. (USD) 2.75% 5/20/2022 (05/15/2019):1250MM Senior Unsecured Notes, Price at Issuance 99.88, Yielding 2.79%.

NEW ISSUANCE WATCH: on 5/16/19 participants welcome a $500M new corporate-bond offering by Wrkco 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)	Road King Infrastructure LTD (5Y Sen USD MR14) Cable & Wireless Communication (5Y Sen USD CR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• PCI GAMING AUTHORITY, Medallion Midland Acquisition, Eldorado Gold Corp.

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 13 bp (basis points), as of 05/16/19
• Net positive capital flows into high-yield ETFs & mutual funds

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