Investment Grade Bond Research - May 28, 2019

Posted by Corey Mahoney on May 28, 2019 5:28:32 PM

INVESTMENT GRADE BONDS ROSE AGAINST HIGH YIELDING DEBT in net prices linked to actual trades.  The 10-year note lost 6.4 basis points settling at its lowest since October 2017.  Equities settled lower and gave up gains following the threat of a trade war escalation with China. S&P -0.85%, DOW-0.93%, NASDAQ -0.39%. 

CONSUMER CONFIDENCE HITS A SIX-MONTH HIGH IN MAY climbing to 134.1 revealing how resilient the labor market continues to be.  “Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April”.  Home price growth further slowed in March falling to a growth rate of 3.7 percent and existing home sales are down 4.4 percent from the previous month.  David Blitzer, managing director at S&P Dow Jones Indices stated, “Given the broader economic picture, housing should be doing better.”  Barclays is betting on bundling home loans assembling a team of 144 bankers and traders re-entering the risky market in order to amplify revenues. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bondsHigh-grade edged out high-yield. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Abbvie Inc. (USD) 4.5% 5/14/2035 made analysts' 'Conviction Buy' lists. (See the chart for Abbvie Inc. bonds below.) Corey Mahoney
Key Gainers and Losers Volume Leaders
+   Bristol-Myers Squibb Co. 4.25% 10/26/2049 144A + 0.3%
  Anthem Inc. 3.65% 12/1/2027 + 0.3%
-   Commonwealth Bank of Australia 2.4% 11/2/2020 -0.1%
General Motors Co.   5.95% 4/1/2049
Goldman Sachs Group Inc.   VAR% 5/1/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.32% 0.15% 0.81% 2.95% 5.54% 4.92%
Mining -0.14% 0.01% 0.23% 2.95% 6.40% 6.42%
Construction -0.05% 0.27% 0.90% 3.23% 4.76% 5.52%
Manufacturing -0.07% 0.05% 0.62% 2.73% 4.81% 5.69%
Transportion, Communication, Electric/Gas -0.10% 0.15% 0.74% 3.63% 6.28% 8.02%
Wholesale -0.11% 0.00% 0.65% 3.10% 5.50% 6.16%
Retail -0.16% 0.05% 0.60% 2.71% 5.03% 6.11%
Finance, Insurance, Real-Estate -0.10% 0.10% 0.67% 2.54% 4.65% 6.21%
Services -0.08% 0.09% 0.68% 2.68% 4.92% 6.63%
Public Administration -0.10% 0.21% 0.65% 1.60% 2.07% 4.27%
Energy -0.14% 0.03% 0.28% 3.06% 6.61% 8.16%
Total returns (non-annualized) by rating, market weighted.

unnamed - 2019-05-28T172424.418

New Issues New Issues [Continued]

1. Pennsylvania Electric Co. (USD) 3.6% 6/1/2029 144A (05/28/2019):300MM Senior Unsecured Notes, Price at Issuance 99.809, Yielding 3.62%.

2. Atlas Capital Uk 2019 PLC (USD) FLT% 6/7/2023 (05/28/2019):250MM Unsecured Notes, Price at Issuance 100.


Additional Commentary

NEW ISSUANCE WATCH: on 5/28/19 participants welcome a $300MM new corporate-bond offering by Air Lease Corp. . The most recent data showed money flowed out of high-yield ETFs/mutual funds for the week ended 5/24/19, with a net outflow of $4MM, 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 XR14)
Hovnanian Enterprises Inc. (5Y Sen USD MR14)
SuperValu Inc. (5Y Sen USD MR14)
Atmos Energy Corp. (5Y Sen USD MR14)

unnamed - 2019-05-28T172415.939

Loans and Credit Market Overview


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 19 bp (basis points), as of 05/28/19
  • 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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