Investment Grade Bond Research - May 23, 2019

RISK-OFF SENTIMENT PREVAILED as investment grade debt rose against junk bonds in net prices linked to actual trades.  Jobless claims fell to a seasonally adjusted 211,000 claims surpassing expectations; managers continue to struggle with employee retention and sourcing skilled labor. In other economic news, new home sales declined across the country in all regions except the Northeast sinking 6.9 percent. The 10-year note plunged 7 basis points settling near 18-month lows. S&P -1.19%,DOW -1.11%, NASDAQ -1.58%.

EQUITIES TOOK A NOSE DIVE ON THURSDAY as Wall Street fears the trade dispute with China is becoming a “full-blown trade war”.  Crude oil tumbled 5.86 percent marking the largest single-session drop of the year, crossing below the 200-day moving average.  The markets are grasping the reality surrounding the trade spat, “The uncertainty around trade negotiations is adversely impacting financial markets of all sorts including equities and certainly oil futures”. 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, Microsoft Corp. (USD) 4.5% 2/6/2057 made analysts' 'Conviction Buy' lists. (See the chart for Microsoft Corp. bonds below.) Corey Mahoney cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   CVS Health Corp. 4.1% 3/25/2025 + 0.1%   Dowdupont Inc. 5.419% 11/15/2048 + 0.1% -   Toyota Motor Credit Corp. 2.15% 3/12/2020 -0.1%	General Electric Co.   FLT% PERP (1) Enterprise Products Partners LP   3.35% 3/15/2023

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.28% -0.23% 0.95% 3.14% 5.71% 4.91% Mining 0.12% -0.08% 0.40% 2.87% 6.36% 6.86% Construction 0.18% -0.12% 0.83% 2.94% 4.85% 6.05% Manufacturing 0.12% -0.16% 0.78% 2.58% 4.67% 5.96% Transportion, Communication, Electric/Gas 0.18% -0.15% 0.85% 3.44% 6.13% 8.43% Wholesale 0.08% -0.26% 0.81% 3.06% 5.70% 6.42% Retail 0.11% -0.22% 0.78% 2.57% 4.97% 6.47% Finance, Insurance, Real-Estate 0.12% -0.12% 0.81% 2.33% 4.34% 6.33% Services 0.12% -0.14% 0.87% 2.46% 4.65% 6.87% Public Administration 0.07% -0.10% 0.77% 1.46% 1.95% 4.46% Energy 0.15% -0.08% 0.48% 2.97% 6.51% 8.55%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Suzano Austria GmbH (USD) 5% 1/15/2030 144A (05/22/2019):1000MM Senior Unsecured Notes, Price at Issuance 98.533, Yielding 5.18%. 2. Consumers Energy Co. (USD) 3.75% 2/15/2050 (05/22/2019):300MM Secured Notes, Price at Issuance 98.834, Yielding 3.81%.

NEW ISSUANCE WATCH: on 5/23/19 participants welcome a $750M new corporate-bond offering by Suncor Energy Inc. 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)
Rite Aid Corp. (5Y Sen USD XR14) Weatherford International LTD (5Y Sen USD MR14)	Cable & Wireless Communication (5Y Sen USD CR14) Atmos Energy Corp. (5Y Sen USD MR14)

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

• Service Corp. Intl., Lucid Energy Group LLC, Southern California Edison Co.

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 05/23/19
• Net positive capital flows into high-yield ETFs & mutual funds

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