Investment Grade Bond Research - May 8, 2019

U.S. STOCKS STABILIZED ON Wednesday after two consecutive days of losses. The Dow Jones closed up 0.01% with the other two major indices falling for the third straight day. On the treasury side, there is some optimism regarding a trade deal between the U.S. and China which has decreased demand for U.S. treasuries, causing their yields to increase. 10-Year U.S. Treasury Notes rose 2.5 basis points.  S&P -0.16%, Dow +0.01% , NASDAQ -0.26%.

IN THE CORPORATE BOND MARKET, Bristol-Myers Squibb Co. priced $19B worth of senior unsecured notes. The American pharmaceutical company intends to use the proceeds to fund the acquisition of Celgene Corporation. The notes were issued in nine different tranches ranging from $750MM to $3.75B. The acquistion, which is expected to close in Q3 of 2019, will expand Bristol-Myers pipeline of drugs and give them more negotiating power with insurance companies. ADI proprietary index data showed a net yield increment for high-yield versus high-grade bonds. High-yield edged out high-grade. Among high-yield bonds showing topmost price gains at appreciable volumes traded, T-Mobile USA Inc. (USD) 6% 3/1/2023 made analysts' 'Conviction Buy' lists. (See the chart for ADI Inedexes above.) Andrew Robartes (arobartes@advantagedata.com).

 

Key Gainers and Losers	Volume Leaders
+   American Express Co. FLT% 10/30/2020 + 0.0%   National Retail Properties Inc. 4.3% 10/15/2028 + 0.2% -   Vodafone Group PLC 5.25% 5/30/2048 -0.3%	GE Capital Intl. Funding Co.   3.373% 11/15/2025 Home Depot Inc.   4.5% 12/6/2048

Industry Returns Tracker

Industry Past Day Past Week Past Month Past Quarter YTD Past Year Agriculture, Forestry, Fishing -0.05% -0.11% 0.59% 2.88% 4.75% 4.72% Mining 0.23% -0.04% 0.74% 3.12% 6.28% 6.56% Construction 0.19% 0.26% 0.92% 3.12% 5.08% 5.75% Manufacturing 0.19% 0.08% 0.74% 2.54% 4.69% 5.45% Transportion, Communication, Electric/Gas 0.30% 0.22% 1.09% 3.73% 6.12% 7.91% Wholesale 0.18% 0.01% 0.85% 2.97% 5.53% 6.06% Retail 0.16% 0.06% 0.60% 2.42% 4.72% 5.87% Finance, Insurance, Real-Estate 0.15% 0.05% 0.61% 2.31% 4.11% 5.83% Services 0.19% 0.09% 0.58% 2.38% 4.47% 6.34% Public Administration 0.06% 0.11% 0.46% 1.26% 1.64% 3.96% Energy 0.23% -0.05% 0.72% 3.22% 6.53% 8.39%   Total returns (non-annualized) by rating, market weighted.

New Issues	New Issues [Continued]
1. Brixmor Operating Partnership LP (USD) 4.125% 5/15/2029 (05/07/2019): 400MM Senior Unsecured Notes, Price at Issuance 99.804, Yielding 4.15%. 2. Principal Financial Group Inc. (USD) 3.7% 5/15/2029 (05/07/2019):500MM Senior Unsecured Notes, Price at Issuance 99.602, Yielding 3.75%.

NEW ISSUANCE WATCH: on 5/08/19 participants welcome a $500MM new corporate-bond offering by Bristol-Myers Squibb Co.. 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)
Hertz Corp. (5Y Sen USD XR14) 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:

• Broadcom LTD, 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 15 bp (basis points), as of 05/08/19
• Net positive capital flows into high-yield ETFs & mutual funds

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