Investment Grade Bond Research - May 30, 2019

REVISED GDP DATA REVEALED THE ECONOMY GREW SLOWER THAN EXPECTED in the first quarter of 2019 due to reduced business investment and a decline in corporate profits. Consumer spending overall remained stagnant with one exception, spending on durable goods sank 4.6 percent. Pending home sales fell marking the 16^th straight month of annual declines as the 30-year mortgage fixed rate mortgage dipped below 4 percent. The 10-year note dipped 5.5 basis points. S&P +0.21%, DOW +0.17%, NASDAQ +0.27%. 

JOBLESS CLAIMS SLIGHTLY TICKED HIGHER last week rising by 3,000 claims remaining near historic 50-year lows proving the resilience of the market.  “The labor market remains very tight, layoff activity is low, and there is no evidence in the economic data that suggests that these conditions will change any time soon”. U.S. trade deficit widened in April due to exports falling faster than imports rose.  Crude oil took a dive on Thursday settling down 2.6 percent or $67.62 per barrel. 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, Kellogg Co. (USD) 4.5% 4/1/2046 made analysts' 'Conviction Buy' lists. (See the chart for  Kellogg Co. bonds below.) Corey Mahoney (cmahoney@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Citigroup Inc. 3.2% 10/21/2026 + 0.0%   Abbvie Inc. 2.5% 5/14/2020 + 0.1% -   Toyota Motor Credit Corp. 3.2% 1/11/2027 -0.0%	CVS Health Corp.   5.05% 3/25/2048 Caterpillar Financial Services Corp.   2.1% 1/10/2020

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.05% 0.26% 0.88% 3.77% 6.03% 4.94% Mining -0.04% 0.24% 0.37% 3.46% 6.70% 5.83% Construction 0.03% 0.57% 1.10% 3.85% 5.22% 5.19% Manufacturing 0.04% 0.42% 0.85% 3.29% 5.24% 5.29% Transportion, Communication, Electric/Gas 0.08% 0.59% 1.09% 4.54% 6.81% 7.61% Wholesale -0.03% 0.32% 0.84% 3.17% 5.83% 5.58% Retail 0.04% 0.42% 0.89% 3.37% 5.38% 5.56% Finance, Insurance, Real-Estate 0.04% 0.35% 0.89% 2.90% 4.92% 5.87% Services 0.05% 0.47% 1.03% 3.30% 5.21% 6.15% Public Administration 0.11% 0.39% 0.89% 2.15% 2.38% 4.09% Energy -0.05% 0.24% 0.39% 3.54% 6.95% 7.51%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Southwest Gas Corp. (USD) 4.15% 6/1/2049 (05/29/2019): 300MM Senior Unsecured Notes, Price at Issuance 99.949, Yielding 4.15%. 2. San Diego Gas & Electric Co. (USD) 4.1% 6/15/2049 (05/29/2019):400MM Secured Notes, Price at Issuance 99.895, Yielding 4.11%.

NEW ISSUANCE WATCH: on 5/29/19 participants welcome a $300MM new corporate-bond offering by Southwest Gas 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)
Weatherford International LTD (5Y Sen USD XR14) Hertz Corp. (5Y Sen USD CR14)	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:

• Tundra Energy Marketing , Louis Dreyfus Corp., Service Corp. Intl., Lucid Energy Group LLC

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 18 bp (basis points), as of 05/30/19
• Net positive capital flows into high-yield ETFs & mutual funds

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