Investment Grade Bond Research - May 7, 2019

U.S. STOCKS FELL FOR THE second consecutive day on Tuesday as trade tensions with China persist. The White House’s earlier threats to increase tariffs on Chinese imports appear to have escalated into an impending reality. Reactions today resulted in nearly a 500 point drop in the Dow Jones, which fell to 25,965. 10-Year U.S. Treasury Notes fell 3.3 basis points amid today's news. S&P -1.65%, Dow -1.79%, NASDAQ -1.96%.

ANALYSTS PREDICT VOLATILITY in the markets to continue for weeks to come. According to Corrie Driebusch of the Wall Street Journal, "Semiconductor companies in particular stand to lose a lot from a disappointing trade agreement, as China is a strong driver for the chip-equipment sector". Intel shares fell 2.2% Tuesday as a result of trade tensions, slightly more so than market averages. Crude Oil was down 1.59% as US-China trade tensions pose a possible decrease in global energy demands. 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, Mattel Inc. (USD) 6.2% 10/1/2040 made analysts' 'Conviction Buy' lists. (See the chart for  Mattel Inc. (USD) 6.2% 10/1/2040 below) Andrew Robartes (arobartes@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   Comcast Corp. 4.15% 10/15/2028 + 0.3%   AT&T Inc. 3.4% 5/15/2025 + 0.0% -   IBM Corp. 4.7% 2/19/2046 -0.5%	Comcast Corp.   4.15% 10/15/2028 CVS Health Corp.   5.05% 3/25/2048

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing 0.34% -0.19% 0.61% 2.78% 4.76% 4.68% Mining 0.05% -0.20% 0.46% 2.85% 5.99% 6.10% Construction 0.19% 0.23% 0.79% 3.15% 4.87% 5.34% Manufacturing 0.06% 0.05% 0.56% 2.41% 4.56% 5.26% Transportion, Communication, Electric/Gas 0.10% 0.09% 0.80% 3.50% 5.60% 7.34% Wholesale -0.03% 0.01% 0.69% 2.84% 5.36% 5.55% Retail 0.06% 0.07% 0.49% 2.35% 4.47% 5.52% Finance, Insurance, Real-Estate 0.05% 0.05% 0.48% 2.29% 4.05% 5.65% Services 0.07% 0.04% 0.38% 2.22% 4.26% 6.04% Public Administration 0.00% 0.13% 0.40% 1.29% 1.57% 3.87% Energy 0.05% -0.14% 0.47% 3.01% 6.20% 8.06%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. American Water Capital Corp. (USD) 3.45% 6/1/2029 (05/06/2019):550MM Senior Unsecured Notes, Price at Issuance 99.779, Yielding 3.48%. 2. Consolidated Edison Inc. (USD) 4.125% 5/15/2049 (05/06/2019):700MM Senior Unsecured Notes, Price at Issuance 99.965, Yielding 4.13%.

NEW ISSUANCE WATCH: on 5/07/19 participants welcome a $400MM new corporate-bond offering by
Brixmor Operating Partnership LP. The most recent data showed money flowed into high-yield ETFs/mutual funds for the week ended 5/03/19, with a net inflow of $21.3MM, year-to-date $13.9B flowed into high-yield.

 

Top Widening Credit Default Swaps (CDS)	Top Narrowing Credit Default Swaps (CDS)
Rite Aid Corp. (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:

• Verifone Inc., Twin River Management Group Inc., Lonsdale Finance Pty LTD

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 14 bp (basis points), as of 05/07/19
• Net positive capital flows into high-yield ETFs & mutual funds

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