Investment Grade Bond Research - May 22, 2019

U.S. STOCKS DECLINED WEDNESDAY after the Federal Reserve indicated it will hold off on an interest rate change. Voting member of the Fed James Bullard stated, “Rates are at a good place in the U.S. right now, if anything we are a little restrictive I would say”. The Fed was in agreement that the current policy can stay, but was split on whether it would change if the economy continues on its expected path. Combined with persisting tariff tensions, all three major indices fell today. S&P -0.28%, DOW -0.39%, NASDAQ -0.45%.

TARGET CORP. SHARES ROSE ALMOST 10% before closing up 7.71% following a report of better-than-expected sales, revenue and earnings per share. Target CEO Brian Cornell attributes recent success to “investing in their business” and “adapting to this new omnichannel environment”. The retail giant has recently put money into adding more delivery options including, next day delivery and curbside pickup. 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, Home Depot Inc. (USD) 2.8% 9/14/2027 made analysts' 'Conviction Buy' lists. (See the chart for Home Depot Inc. (USD) 2.8% 9/14/2027 below.) Andrew Robartes (arobartes@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   CVS Health Corp. 5.05% 3/25/2048 + 0.1%   Toyota Motor Credit Corp. VAR% 5/17/2022 + 0.4% -   General Electric Co. FLT% PERP (1) -0.5%	Toyota Motor Credit Corp.   VAR% 5/17/2022 Abbvie Inc.   4.25% 11/14/2028

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.23% -0.08% 0.54% 3.14% 5.38% 4.96% Mining -0.05% -0.01% 0.14% 2.81% 6.13% 6.70% Construction -0.08% -0.11% 0.74% 2.82% 4.17% 6.00% Manufacturing -0.08% -0.09% 0.48% 2.57% 4.51% 5.84% Transportion, Communication, Electric/Gas -0.10% -0.08% 0.51% 3.49% 5.84% 8.19% Wholesale -0.10% -0.15% 0.64% 2.98% 5.51% 6.34% Retail -0.08% -0.09% 0.49% 2.64% 4.86% 6.35% Finance, Insurance, Real-Estate -0.07% -0.10% 0.58% 2.38% 4.30% 6.27% Services -0.07% -0.04% 0.59% 2.56% 4.54% 6.82% Public Administration -0.00% -0.06% 0.63% 1.50% 1.86% 4.32% Energy -0.08% -0.02% 0.15% 2.93% 6.25% 8.44%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Blackstone Diversified Alternatives Issuer L.L.C. (USD) 5.25% 5/15/2029 (05/21/2019): 347MM Secured Notes, Price at Issuance 100, Yielding 5.25%. 2. BP Capital Markets PLC (USD) FLT% 11/24/2020 (05/21/2019):1000MM Senior Unsecured Notes, Price at Issuance 100.

NEW ISSUANCE WATCH: on 5/22/19 participants welcome a $300M new corporate-bond offering by Consumers Energy Co. The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/17/19, with a net outflow of $2.6B, year-to-date $11.0B flowed into high-yield.

 

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Hertz Corp. (5Y Sen USD CR14) Hovnanian Enterprises Inc. (5Y Sen USD MR14)	SuperValu Inc. (5Y Sen USD XR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Lucid Energy Group LLC, Southern California Edison Co., Horizon Pharma 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 16 bp (basis points), as of 05/22/19
• Net positive capital flows into high-yield ETFs & mutual funds

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